J.P. Morgan Chase (JPM) reported a net loss of $400 million, or $0.17 per share, for the third quarter of 2013, as the company experienced $9.2 billion in legal expenses. We do not intend to significantly alter our fair value estimate, but we plan to reduce our stewardship rating for the company from Exemplary to Standard.
Although we once considered the "London Whale" incident a one-time risk management failure, the escalating costs of past misdeeds at J.P. Morgan and its predecessors, as well as the firm's deteriorating relationships with regulators and other government agencies, forced us to reconsider our position. Our previous rating leaned on J.P. Morgan's skillful use of repurchases, but the London Whale incident forced a halt to repurchases at a time when the firm was trading at a sizable discount to our fair value estimate. More importantly, the SEC found that the incident was due in part to several failings on the part of senior management.