J.P. Morgan's Net Falls 53%

J.P. Morgan Chase & Co. posted a 53% decline in second-quarter net income as credit-loss provisions more than doubled and its investment bank cut the value of leveraged-loan and mortgage-related securities by a further $1.1 billion.

The nation's biggest bank by market value, which has been battered less than others by the credit crisis, reported net income of $2 billion, or 54 cents a share, compared with $4.23 billion, or $1.24 a share, a year earlier. Net revenue fell 3% to $18.4 billion. Analysts polled by Thomson Reuters had expected earnings of 44 cents a share on revenue of $16.55 billion. Shares rose 4.1% in premarket trading.

Chief Executive Jamie Dimon said he expects "the economic environment to continue to be weak -- and to likely get weaker -- and for the capital markets to remain under stress." He added that "since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer."


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The latest results included a $540 million loss related to the company's purchase of Bear Stearns Cos. In mid-May, Mr. Dimon said J.P. Morgan's $1.08 billion purchase of Bear would reduce J.P. Morgan's quarterly earnings by $500 million, plus or minus several hundred million dollars, due to its share of Bear's losses and merger costs.

Mr. Dimon noted Thursday that "through the truly remarkable partnership and efforts of our people in extremely difficult times, we made great progress towards full integration, while also significantly reducing our combined risk positions. We now have an expanded platform to better serve our institutional clients -- one which we fully expect will make our franchise stronger over time."

The bank's return on equity -- an important measure of profitability at financial firms -- fell to 6% from 14%, and credit-loss provisions more than doubled to $3.45 billion but fell 22% from the first quarter. Home-equity charge-offs surged to 2.16% from 0.44%, while subprime-mortgage charge-offs quadrupled. Charge-offs for prime mortgages surged to 0.91% from 0.05%.

The company's investment bank saw profit plunge 67% amid the markdowns as revenue fell 5.7%. Its retail-bank operations saw earnings fall 23% on the surging credit-loss provisions, as revenue increased 15%.

The provisions also hurt the credit-card business, where earnings slumped 67% amid a 2% revenue drop. The charge-off rate surged to 4.98% from 3.62% a year earlier and 4.37% in the first quarter. At an investor conference in May, Mr. Dimon said the firm expected the quarter's losses to be about 5%, exceed that level in the second half of the year and possibly average 6% in 2009.