JPMorgan suffers earnings slide

JPMorgan suffers earnings slide
Profits at Wall Street firm fall short of estimates as the firm takes $1.3 billion hit related to subprime exposure.

NEW YORK (CNNMoney.com) -- JPMorgan Chase & Co. reported disappointing quarterly earnings Wednesday after suffering a $1.3 billion subprime-related hit, becoming the second bank this week to post dismal results.

The company said net income fell 34 percent to $3 billion, or 86 cents a share, during the fourth quarter. The company earned $4.5 billion, or $1.09 a share, in the same period last year.

JPMorgan Chase was expected to earn 93 cents a share for the quarter ended in December, according to analysts surveyed by earnings tracker Thomson Financial.

Revenue rose 7 percent to $17.4 billion from $16.2 billion in the year-earlier period, beating estimates of $17.05 billion.

Shares of JPMorgan Chase (JPM, Fortune 500) edged lower in pre-market trading on the news.

The company reported a $1.3 billion writedown due to the decline in value of its subprime holdings, which include complex instruments known as collateralized debt obligations.

Chairman and CEO Jamie Dimon said he remained "cautious" as the firm entered 2008, warning that the company could suffer if the economy weakens.

"However, we feel well-positioned given the investments and actions we have taken over the past few years to improve our businesses' operating margins, create a stronger systems infrastructure and build a fortress balance sheet," he said in a statement.

Dimon characterized the results for the quarter as "mixed", citing weaker performance in the company's investment banking arm - the source of the write-down.

During the quarter, net income in this division fell 88 percent to $124 million from $1.01 billion a year ago.

Other units, however, showed signs of growth. The company's asset management, as well as its commercial banking and private equity businesses, all reported an uptick in profits.

There were also indicators that JPMorgan Chase is not suffering the capital roiling some of its rivals, which have looked to primarily foreign investors for help.

The company said its so-called tier 1 capital ratio - a key measure of its ability to absorb losses - stood at 8.4 percent during the quarter, unchanged from the previous quarter but down slightly from a year ago.

JPMorgan has weathered tightening credit conditions better than rivals Merrill Lynch (MER, Fortune 500) and Citigroup (C, Fortune 500), which posted a record $9.8 billion fourth-quarter loss Tuesday and took a giant $18.1 billion write-down.

Last quarter, JP Morgan reported a rise in profit, beating Wall Street estimates, even as its investment banking business was hurt by turmoil in the global credit markets.

Elsewhere in the financial sector, Wells Fargo reported a 38 percent decline in net income Wednesday. Merrill Lynch and Washington Mutual (WM, Fortune 500) are slated to post results Thursday.

CNN