JPMorgan Chase & Co., the third largest U.S. bank beat expectations on Wednesday, despite reporting a 50 percent drop in first quarter profit as it wrote down $5.1 billion in assets linked to mortgages and other loans.
Investors sent the bank's share price up more than 4 percent to $43.90 in early afternoon trading.
Profit for the three months of 2008 was $2.37 billion, or 68 cents per share. A year earlier in the same quarter the bank earned $4.79 billion, or $1.34 per share. Revenue fell 11 percent to $16.9 billion.
Our earnings this quarter were down significantly as market conditions and the credit environment remained challenging, said Jamie Dimon Chairman and Chief Executive Officer.
JPMorgan's profit beat Wall Street analysts' expectations. Analysts had predicted a profit of 64 cents, according to a poll from financial information provider Thomson First Call. Revenue also matched estimates.
The bank also tripled the funds it sets aside for credit losses on a managed basis. It now holds $5.11 billion compared to $1.6 billion a year ago.
On March 16, the bank announced it planned to buy investment bank Bear Stearns. It raised its original offer of $2 per share to $10 per share, or about $1.2 billion in stock.
Dimon said he expects continued weakness in the economic environment and stress for capital markets.
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, he said. He said the company was prepared to successfully position itself following the downturn.
The investment banking division lost $87 million for the quarter, compared with a gain of $1.54 billion a year earlier. Its net revenue was down 52 percent to $3.01 billion.
Dimon said the division had markdowns related to leveraged lending, mortgages, and increased loan loss reserves.
The retail banking division lost $227 million, down from a gain of $859 million. The division increased the funds set aside for losses by $417 billion to $2.49 billion.
The increased loan loss reserves were related to home equity and subprime mortgages as the performance in these portfolios continued to deteriorate, Dimon said.
Credit card services earned $609 million down from $765 million a year earlier. Commercial banking dropped to $292 million from $304 million. Treasuries & Securities Services fell from $403 million to $263 million.
Retail Financial Services, Card Services, Commercial Banking and Treasury & Securities Services all reported organic revenue growth and well-managed expense levels, he added.
Asset Management was down to $356 million from $425 million. The Corporate and Private Equity division rose 63 percent to $1.02 billion from $631 million.
The division benefitted from the sale of Visa shares in its initial public offering, which raised $955 million. Excluding the Visa gain, net income was $72 million.