JPMorgan says Q4 earnings declined

JPMorgan Chase & Co, the third-biggest US bank, said profit fell 34 percent, more than analysts estimated, after $1.3 billion of writedowns for subprime-mortgage investments.

Fourth-quarter net income declined to $2.97 billion, or 86 cents a share, from $4.53 billion, or $1.26, a year earlier, the New York-based company said yesterday in a statement. Seventeen analysts surveyed by Bloomberg estimated profit of 92 cents.

The drop was the first since Jamie Dimon became chief executive officer in 2005. JPMorgan's writedown compared with the $18.1 billion announced by Citigroup Inc on Tuesday as the bank invested less in subprime mortgages and instead relied on fee-based businesses such as retail banking. Earnings at the consumer banking unit rose 5 percent.

"We do have concerns about the credit-card division and the challenges in the fixed-income marketplace," said William Fitzpatrick, an analyst at Racine, Wisconsin-based Optique Capital Management, which oversees $1.7 billion including JPMorgan shares.

Revenue rose 7 percent to $17.4 billion, compared with the average estimate of $17.2 billion. Last year's fourth-quarter earnings included a one-time gain of $622 million.

JPMorgan lost 18 percent of its market value in the past 12 months, compared with 50 percent at New York-based Citigroup and 29 percent at Charlotte, North Carolina-based Bank of America Corp. The stock fell $2.19 yesterday to $39.17.

Deutsche Bank AG analyst Michael Mayo reduced his rating on JPMorgan to "hold" from "buy" yesterday "due to accelerating problems in US consumer banking". Losses from credit cards and mortgages are increasing as the global economy slows. Citigroup said on Tuesday its record $9.83 billion loss was due in part to an increase in provisions for losses on auto and credit-card loans.

"We feel that JPMorgan cannot escape tougher external conditions," Mayo wrote in his research note.

Richard Bove, an analyst at Punk Ziegel & Co in Lutz, Florida, said JPMorgan may capitalize on its relative success in protecting its capital by purchasing another bank. Bove pointed to Seattle-based Washington Mutual Inc, the biggest savings and loan, as one possibility.

Agencies

(China Daily 01/17/2008 page17)