J.P. Morgan Chase & Co on Wednesday reported a second-quarter profit, reversing a year-ago loss that included a big legal charge. Trading revenue fell 50 percent, a more dramatic decline than what other brokers have reported in a difficult trading environment. The No 3 US bank posted net income of $1 billion, or 28 cents per share, compared with a year-earlier net loss of $548 million, or 27 cents a share.
Excluding charges of $1.9 billion for legal reserves related to J.P. Morgan's dealings with Enron Corp and $279 million from its $58 billion purchase of Bank One Corp last year, earnings were $2.3 billion, or 66 cents a share.
Wall Street analysts had expected profit of 64 cents a share, according to Reuters Estimates.
Total net revenue rose to $12.7 billion, up from $8.6 billion a year ago on additional revenue from the merger with Bank One, but sharply lower than the $13.6 billion posted in the previous quarter.
In June, J.P. Morgan agreed to pay $2.2 billion to Enron stock and bond investors who had accused the bank of helping the energy company in a huge accounting fraud.
On the trading side, revenue fell by half to $614 million in what the bank called a challenging market environment. In the first quarter, trading revenues were $2.2 billion in a much easier market for profit-making.
"We didn't perform the way we'd like in our trading businesses," said Chief Financial Officer Mike Cavanagh in a conference call with reporters. "Market conditions made it very challenging for traders to make money across many products and geographies," he added.
The bank is forecasting a better trading environment than the second quarter going forward.
The anaemic marketplace made it difficult for the bank to manage its securities portfolios and earn money making bets with its own money. It also reduced trading by customers.
That helped pull investment bank profits down 6 percent, to $606 million. Investment banking fees rose 8 percent to $965 million with advisory revenues having the best quarter since 2000.
"The investment bank continued to show unpredictable results; we continue to believe senior management must, and will, address this as its next urgent task," said Merrill Lynch & Co analyst Guy Moszkowski in a research note.
In the retail bank, earnings rose to $980 million from $584 million a year earlier, largely due to additional profit from expanded retail operations into the Midwest and Southwest with the Bank One merger.
In the year-earlier quarter, J.P. Morgan put aside an additional $2.3 billion for litigation involving its advisory role at Enron and telecommunications company WorldCom, which was also involved in a massive accounting scandal.
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