JP MORGAN CHASE today confirmed it would pay $2.2 billion (£1.2 billion) to settle its share of a $30 billion class action lawsuit brought by shareholders of Enron, the bankrupt energy company.

The settlement comes less than a week after Citigroup, the world’s biggest banking group, agreed to settle the same lawsuit for $2 billion.

JP Morgan’s exposure to the Enron scandal is similar in size to that of Citigroup, but a source said the bank had offered a slightly bigger sum to the shareholders in order to precipitate a settlement.

The JP Morgan settlement figure falls short of the record-breaking $2.6 settlement reached by Citigroup in the WorldCom case. The biggest Wall Street banks are paying huge settlements with greater frequency as they seek to put the last five years of corporate scandal behind them.

JP Morgan has reserves to cover lawsuits that contain about $3.5 billion, which should be enough to cover a settlement as big as $2.5 billion while leaving the bank cash for future liabilities.

The settlement comes at a bad time for JP Morgan, as the bank has already admitted that profits for the second quarter of the year will be weak.

The Enron class action was led by the University of California pension fund. The university sought as much as $30 billion amid claims that some of the world’s biggest banks conspired with Enron to falsify accounts, hide billions of dollars of debt and falsely inflate the company’s bottom line. Merrill Lynch, Credit Suisse First Boston, Barclays and Royal Bank of Scotland were among those named in the lawsuit.

It is understood that JP Morgan reached a settlement in principle with the university on Monday while lawyers for both sides were last night working over the fine print of the deal.

The settlement does not include any admission of wrongdoing by JP Morgan, the bank said in a statement.

Enron collapsed in 2001 to become the biggest bankrupt in history after a mountain of debt was discovered hidden in its accounts. WorldCom, the defunct telecoms company, followed suit soon after and broke the record again. Kenneth Lay and Jeffrey Skilling, both of whom were once Enron chief executives, will stand trial in January on charges of fraud related to the collapse.

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