JPMorgan Q3 trading revenue on track to fall 30 percent

NEW YORK ― JPMorgan Chase & Co’s trading revenue is on track to fall 30 percent this quarter from the second quarter, the bank’s investment banking head said on Tuesday.

Investment banking fees could be about $1 billion, said JPMorgan’s Jes Staley, compared with $1.9 billion in the second quarter.

The European debt crisis and the battle over the U.S. debt ceiling weighed on multiple markets, reducing the value of securities that banks hold in their trading inventories. Trading volume was strong for some products, but mainly in markets where margins are slim for the Wall Street firm, like U.S. Treasuries.

Lower market levels also cut into asset management revenue, and the bank is on track to report a modest loss in its private equity business, Staley said.

Staley is widely seen as a possible successor to Chief Executive Jamie Dimon. The investment bank that Staley oversees is the largest of JPMorgan’s six business segments.

Speaking at a Barclays Capital conference in New York, Staley said the bank is “not worried” about its European loans. JPMorgan is the second-largest U.S. bank with $2.2 trillion of assets.

JPMorgan is usually the first major U.S. bank to report quarterly earnings. Results are next due in October.

JPMorgan shares were up 1.2 percent to $32.81 in late Tuesday morning trade. They are down about 22 percent for the year so far.

JPMorgan to pay $153.6 million in SEC fraud case

WASHINGTON/NEW YORK ― JPMorgan Chase & Co agreed to pay $153.6 million to settle U.S. Securities and Exchange Commission charges that it defrauded investors who bought mortgage securities sold just before the nation’s housing market collapsed.

The regulator’s complaint against the banking giant was larded with excerpts from internal JPMorgan communications that indicated bankers sold a collateralized mortgage obligation in 2007 to ensure that it could get credit-scarred mortgage securities off its books.

“We are soooo pregnant with this deal, we need a wheel-barrel to move around,” the head of CDO distribution wrote in a March 22, 2007 email to the sales staff. “Let’s schedule the cesarian, please!”

The settlement with JPMorgan, the second-largest U.S. bank, echoes on a smaller scale the $550 million accord that Goldman Sachs Group Inc reached last July over its Abacus collateralized debt obligation.

Both cases involved charges that banks let hedge fund clients structure complex securities ― and then bet against them ― without disclosing their involvement to investors.

The SEC on Tuesday also filed civil charges against Edward Steffelin, 41, a former managing director at the now bankrupt GSC Capital Corp, which served as collateral agent for the JPMorgan CDO marketed as Squared CDO 2007-1.

It alleged that he hoped to get a job with the Magnetar Capital LLC hedge fund, while helping to create marketing materials that failed to disclose that Magnetar chose some securities in the CDO and had a nearly $600 million bet that they would lose value.

JPMorgan sold $150 million of Squared CDO notes to pension funds and investors worldwide that lost most of their value in just 10 months, the SEC said.

Credit union regulator sues JP Morgan and Royal Bank of Scotland

WASHINGTON ― The U.S. credit union regulator filed lawsuits on Monday against JPMorgan Chase & Co.’s JPMorgan Securities and Royal Bank of Scotland Group Plc’s RBS Securities, alleging misrepresentation of investment vehicles backed by mortgages.

The National Credit Union Administration said the lawsuits seek damages in excess of $800 million and are related to the failure of five corporate credit unions.

The agency said in a statement on Monday that it may file more lawsuits in an effort to recover billions of dollars in losses related to the failure of these institutions.

“NCUA’s legal actions are based on ongoing investigations of individuals and entities responsible for selling these securities to the failed institutions,” said NCUA Board Chairman Debbie Matz. “By these actions we intend to hold responsible parties accountable.”

JPMorgan and RBS declined to comment.

The lawsuits, filed in U.S. District Court in Kansas, allege that the firms made “numerous misrepresentations” in the offering documents for the securities.

“These misrepresentations caused the corporate credit unions that bought the notes to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial,” NCUA said.

Corporate credit unions provide services to retail credit unions including lending, as well as check and payment clearance services.

The wholesale credit unions have experienced more troubles than their retail counterparts because they did not face the same restrictions on permitted investments, leading to big losses during the financial crisis.

The NCUA seized three large corporate credit unions in 2010 after seizing two in 2009.

The five institutions are Members United Corporate Federal Credit Union of Warrenville, Ill.; Southwest Corporate Federal Credit Union of Plano, Texas; Constitution Corporate Federal Credit Union of Wallingford, Conn. U.S. Central Corporate Federal Credit Union of Kansas; and Western Corporate Federal Credit Union of California.