JPMorgan Chase & Co , the second largest U.S. bank, slashed its common stock dividend 87 percent on Monday, a surprise move by a lender considered among the strongest in the U.S. financial sector.

The decision to cut the quarterly dividend to 5 cents per share from 38 cents will save $5 billion a year.

Our action today is being done as a strong precautionary measure to help ensure that our fortress balance sheet remains intact even if conditions worsen significantly, said Chief Executive Jamie Dimon.

JPMorgan also said it is turning a profit this quarter, and that its outlook for the quarter is roughly in line with analyst expectations.

Analysts, on average, expected a profit of 35 cents per share on revenue of $21.96 billion, according to Reuters Estimates.

JPMorgan received $25 billion in capital from the government's Troubled Asset Relief Program (TARP). Dimon said the dividend cut is not directly related to TARP. Our reason for accepting TARP capital still holds -- namely, to help stabilize the banking system and economy.

The bank said it hopes to return to a more normalized dividend as soon as feasible once the environment stabilizes.

Bank of America Corp and Citigroup Inc , JPMorgan's largest rivals, have slashed their dividends to a penny per share since November.

Shares of JPMorgan fell 30 cents to $19.21 in after-hours trading following the dividend cut, which was announced after markets closed. They fell 39 cents to $19.51 in regular trading.

(Reporting by Jonathan Stempel; editing by Jeffrey Benkoe)