By David Henry

(Reuters) - JPMorgan Chase & Co Inc's <JPM.N> hard-charging chief executive, Jamie Dimon, looked a bit more vulnerable on Friday after the bank took a $7.2 billion hit from penalties, expected future litigation and other legal matters, reporting its first quarterly loss since 2004.

The loss is a blow to Dimon, who has long used the bank's steady profit as a shield to ward off critics of its mounting regulatory and legal issues.

In unusually humble language for a CEO once lionized on Wall Street and in Washington, Dimon acknowledged that the first loss under his leadership was "very painful for me personally."

JPMorgan reported a loss of $380 million, or 17 cents per share, for the third quarter. A year earlier it posted a profit of $5.71 billion, or $1.40 a share.

Dimon earned widespread praise as a risk manager for avoiding most of the mortgage-related losses that hobbled rivals during the financial crisis. But he was less adept at anticipating legal expenses.

The third-quarter legal hit includes money set aside for future settlements. Dimon cautioned that these expenses will likely be elevated for the next year or two.

"I wish we could reduce the uncertainty for investors, but we can't," he told reporters in a conference call.

He added in a later conference call with investors that it is "very hard to fight with your regulators and the federal government."

Even putting litigation aside, revenue fell and other results were lukewarm. Weak fixed-income markets squeezed revenue at its investment bank, off 2 percent from a year ago and down 17 percent from the second quarter, casting a pall over expectations for bond-trading results at other Wall Street banks.

Equity markets revenue gained 20 percent, but rivals such as Goldman Sachs Group Inc <GS.N> and Morgan Stanley <MS.N>, both due to report quarterly results next week, tend to be more heavily weighted in fixed income.

'HIT FROM ALL SIDES'

JPMorgan disclosed it has set aside a total of $23 billion for settlements, fines and other legal expenses.

Dimon's reluctance to say the legal expenses of $7.2 billion in the latest quarter will be enough to cover the bulk of future costs is prudent, said Walter B. Todd, chief investment officer at Greenwood Capital Associates, which owns JPMorgan shares.

"It is a very fluid situation and they have multiple agencies involved, so they are getting hit from all sides," said Todd, whose firm manages $950 million. "They are trying their best to front-load these charges and move forward. We can only hope the government will do the same."

JPMorgan executives have long been quick to point out the bank's profitability when investors bring up its troubles. The bank posted record profits last year, even as bad derivatives bets known as the "London whale" trades resulted in $6 billion of losses.

But the third-quarter loss underscores how legal problems threaten the profitability of a bank that has long boasted of a "fortress" balance sheet.

Regulators and prosecutors are looking into possibly fraudulent sales of mortgage securities and the bank's role in setting certain benchmark borrowing rates. The Securities and Exchange Commission is investigating possible bribery in the hiring of sons and daughters of executives of Chinese state-owned companies. The bank faces more than a dozen probes globally.

PAYOUT SEEN SAFE

To be sure, the bank, whose shares are up 19 percent this year, and its CEO still have many fans.

"While headlines today suggest the government is looking to slap some fines on them for business units that underwrote or securitized various products, JPMorgan is still in far better shape than any peers," said Tom Jalics, senior investment analyst at Key Private Bank. "It's not even close."

Dimon became CEO on December 31, 2005, and added the post of chairman a year later.

JPMorgan Chief Financial Officer Marianne Lake said legal expenses would not affect stock repurchase plans and that the bank "has every intention to pay our dividends."

JPMorgan shares were fractionally higher in midday trading, up 24 cents to $52.76.

Even beyond the litigation expenses, the third-quarter results were less than spectacular, with revenue declining 8 percent to $23.9 billion - about in line with forecasts - as fee income and lending income both fell.

JPMorgan and other U.S. banks have struggled to boost profits as loan volume has declined, interest margins have been under pressure, and fee income from debit cards and mortgages has been squeezed.

Also on Friday, Wells Fargo & Co, the largest U.S. mortgage lender, reported a 13 percent rise in third-quarter profit but saw a sharp drop in mortgage banking income as a boom in refinancings began to fade.

Mortgage banking income also declined at JPMorgan, with net revenue falling 45 percent to $2.02 billion.

But the litigation issues loom largest. In September, JPMorgan tried to reach a settlement with the U.S. Department of Justice and other federal and state agencies to resolve claims against the bank over its mortgage businesses. An $11 billion settlement was discussed, according to sources familiar with the matter. Dimon went to Washington to meet with U.S. Attorney General Eric Holder on September 25, but no deal has resulted.

Some of those claims relate to mortgage bank Washington Mutual and investment bank Bear Stearns, two failing firms that JPMorgan took over in 2008.

(Reporting by David Henry in New York; Additional reporting by Tanya Agrawal in Bangalore and Lauren Tara LaCapra in New York; Editing by John Wallace)