Chase, JP Morgan warn on profits

Low volatility on currency markets has depressed profits

US banks Chase Manhattan and JP Morgan have warned that their profits will be lower than expected in the fourth quarter of this year.

The merger partners also said they expected their union to lead to 5,000 jobs losses, about 2,000 more than originally expected.

"The current market environment has clearly put pressure on revenues and will lead to lower-than-expected results for the quarter," Douglas Warner, JP Morgan chairman, and William Harrison, Chase chairman, said in a joint statement.

The banks are the latest in a line of US blue chip and technology companies to warn of the effects of the slowing economy on their businesses.

They did not provide an earnings estimate but analysts forecast earnings of 78 cents per share for Chase and $2.62 per share for JP Morgan.

Shares in JP Morgan closed down $6.25 at about $158 while shares in Chase Manhattan closed down $1.5 at nearly $43.

Their profit warning also prompted other investors to sell and the Dow Jones Industrial Average closed down 119.4 points at 10,674 points while the technology-heavy Nasdaq closed down 94.27 points at 2,728.50 points.

Fewer customers

The two banks attribute the expected drop in earnings to a challenging market environment, including low volatility in currency markets and a decline in customer volumes.

In October, they announced plans to merge in a $35bn deal.

JP Morgan employs 3,500 people in the City of London, while Chase Manhattan employs 8,500 people in the UK.

The deal is the latest in a series of global banking mergers, as banks link up to compete in an industry shaken by the growth in internet banking and globalisation.

The deal catapults Chase Manhattan into the top league of investment banking and strengthens its position in European banking.