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Wednesday, 16 October, 2002, 16:09 GMT 17:09 UK
JP Morgan Chase cuts 2,000 jobs
JP Morgan Chase has been hit by bad telecoms loans
The number two US bank, JP Morgan Chase, has announced 2,000 job cuts as it unveiled a massive drop in profits.

The weak stock market, together with the bank's exposure to the struggling telecoms sector, meant net profit crashed by 91% to $40m in the July to September quarter.

But there was better news in the financial sector from brokerage Merrill Lynch.

It reported a 22% rise in profit for the quarter to $693m, as the effects of cost-cutting measures the firm has taken helped to counter weak trading figures.

Tough measures

JP Morgan Chase had warned last month that its earnings would be hit by bad loans to telecoms and cable companies, and by the slump in equity trading.

"While the strength reflected in our retail and operating services business is a major positive, our performance in the aggregate is very disappointing," chairman and chief executive William Harrison said.

The company said it would take a $450m charge to pay for the job cuts and other restructuring charges.

It said it expected the shake-up make savings of about $700m.

Excluding special charges, earnings came in at $325m, or 16 cents a share, which was at the top end of analysts' expectations.

Cost cutting boosts Merrill

Meanwhile brokerage Merrill Lynch was demonstrating the benefit of taking early cost-cutting measures.

"The expense side is the key to the Merrill story, and they are executing on it very well," said Lauren Smith, an analyst at Keefe, Bruyette & Woods.

The firm has shed nearly 19,000 jobs, or a quarter of its workforce, since the beginning of last year.

Excluding one-off items, Merrill's third-quarter earnings were $579m, or 61 cents a share, compared with $475m in the same period last year.

The smaller payroll at Merrill helped to offset falling revenues at the business as stock market weakness continued to bite.

Total net revenue fell 15% to $4.4bn, as income at its investment banking and trading businesses continued to suffer.

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