US bank JPMorgan Chase has reported a drop in profit for the last trimester of 2013 after legal costs relating to the fraudster Bernie Madoff have reduced earnings.Net income fell 7.3% for the fourth quarter to $5.3bn (£3.22bn), from $5.7bn in the last quarter of 2012. The bank said one-off items had damaged income after tax by $1.1bn.
Conversely, Wells Fargo, the US's biggest mortgage lender, said fourth quarter profits rose 11% to $5.4bn.
Wells Fargo terminated thousands of staff in the second half of the year in order to boost earnings.
Last week, JP Morgan agreed to pay $2.6bn in settlements related to the inadequate handling of Madoff accounts. The bank was accused of not reporting its concerns about Madoff's investment scheme. Then it emerged that another $850m from fourth-quarter earnings was needed to cover expenses.
The bank's chairman and chief executive, Jamie Dimon, said the move was "in the best interests of our company and shareholders for us to accept responsibility, resolve these issues and move forward".
The 75-year-old Madoff is currently serving a 150-year prison sentence in the US after being found guilty of scamming investors.
JP Morgan was Madoff's key bank and their business relationship went back to the far 1980s.
Over the past year, JP Morgan has paid some $20bn in fines for various violations involving the US financial crisis, including the so-called "London whale" trading loss, a landmark blunder in which a single trader generated losses of $6bn.
JPMorgan has also been accused of manipulating a key interest rate, the London inter-bank offered rate, or Libor.
The bank has also made some one-off gains. These included income from the sale of Visa shares, as well as from the sale of its principal property, One Chase Manhattan Plaza in New York.
JPMorgan's investment banking business saw a 57% drop in earnings, largely due to a £1.5bn loss as the bank readjusted the value of some investments.
Revenue for the fourth quarter was $24.1bn, 1% lower than in 2012.
"JPMorgan remains a formidable franchise, even as litigation settlements dampen down near-term profitability," Filippo Alloatti, senior analyst at Hermes Credit, said. He expects JP Morgan's legal costs to be reduced greatly going forward.
Wells Fargo's profit rise was better than analysts had predicted, due mainly to a sharp fall in provisions for bad loans.
The fall helped to offset a 49% drop in its mortgage lending activity.
"Strong earnings power and capital levels, and an improving economic outlook are major reasons why we look ahead to 2014 with optimism," said chief executive John Stumpf.