Page last updated at 12:25 GMT, Wednesday, 16 April 2008 13:25 UK

Write-downs dent JP Morgan profit

JP Morgan office
The firm snapped up Bear Stearns as its rival floundered.

JP Morgan Chase has said that profits fell in the first three months of 2008, in part due to write-downs as a result of the credit crisis.

The New York-based firm made $2.37bn (1.2bn) in the quarter, down from $4.8bn a year earlier.

The results were roughly in line with analysts' expectations.

JP Morgan last month agreed to buy rival Bear Stearns following its near-collapse as clients lost confidence and withdrew funds.

Bear Stearns got into trouble when other banks refused to lend it money because of fears that it had too much exposure to US mortgage debt.

Long-term damage

JP Morgan's investment banking arm wrote off about $2.6bn between January and March, which included $1.2bn from mortgages and $1.1bn on loans to fund corporate buyouts

And despite the bank's "solid business momentum", chief executive Jamie Dimon was downbeat about the future.

If we can come to the end of this week with a fairly clean bill of health, that will give markets a bit of a kick-start
Richard Hunter
Hargreaves Lansdown

"Our expectation is for the economic environment to continue to be weak and for the capital markets to remain under stress," he said.

"These factors have affected, and are likely to continue to negatively impact, our firm's credit losses, overall business volumes and earnings - possibly through the remainder of the year, or longer."

However analysts said that the figures were not as bad as they could have been.

"It's not as if there's great news coming out, but relative to what we've seen over the last six months there don't seem to be nearly the massive downside surprises and write-offs," said Rick Meckler of Libertyview Capital Management.

"People who were expecting the financials to drop further aren't getting the type of negative news that can lead to a new round of sell-offs."


Other banks will report this weak including Merrill Lynch, another high-profile victim of the credit crunch.

And if their figures are not too bleak, investors may be encouraged, said Richard Hunter at Hargreaves Lansdown.

"Given what we've seen over the last few months and the nervousness around anything bank-related, if we can come to the end of this week with a fairly clean bill of health, that will give markets a bit of a kick-start."

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