JPMorgan Chase on Wednesday reported a "disappointing" performance from its traders in the fourth quarter, resulting in a 38 per cent fall in profits from its investment compared with the previous three months.
Jamie Dimon, chief executive of the US's third-biggest bank, said the trading downturn reflected "poor positioning" on US interest rates and in energy, where its traders "gave back" some of the profits they had made in a very strong thrd quarter.
However, group earnings came in close to Wall Street forecasts at $2.6bn excluding exceptional items, a 13 per cent increase on the previous year.
Mr Dimon said the integration of Bank One, acquired for $55bn in 2004, was on plan but damped speculation that JPMorgan was ready to do another big deal. "I think our plate is full," he said.
A recent press report named JPMorgan as one of a number of US banks that were looking at Standard Chartered, the UK-based emerging markets bank.
The investment bank's earnings for 2005 as a whole were flat at $3.66bn, compared with the combined results 2004 figures for JPMorgan and Bank One, in a year when many competitors saw strong growth.
Trading revenues for the year jumped 56 per cent to $5.86bn but Mr Dimon said the quarter to quarter performance was "too volatile" compared with rivals. He expected trading revenues to increase in 2006 with less volatility.
Some of the problems in the trading last year - though not in the final quarter - were caused by some big trades that went sour. Mr Dimon said such big errors would not be repeated and that there would be "some reduction of risk going forward".
But over the longer term, "we will be taking more risk in aggregate".
Although energy trading, in which JPMorgan has been investing heavily, had a poor fourth quarter, for the full year it "far exceeded expectations". Investment banking fees were up 12 per cent at $4.09bn with the $1.15bn in the fourth quarter the highest since the first quarter of 2000.
"We are confident of building a very good investment bank," said Mr Dimon on a conference call.
The shares were down just over 1 per cent at $39.20 at noon in New York.
Earnings from retail financial services were up 4 per cent to $803m in the fourth quarter but earnings from cards tumbled 41 per cent to $302m because of the spike in personal bankruptcies caused by new legislation.
Commercial banking earnings were 14 per cent higher in the fourth quarter at $289m.
Treasury and securities services made $300m, more than double the previous year, while asset and wealth management earnings increased 30 per cent to $342m.