updated 1/16/2008 9:31:17 AM ET 2008-01-16T14:31:17

JPMorgan Chase & Co. said Wednesday its fourth-quarter profit fell 34 percent after its exposure to subprime mortgages — though much smaller than at banking peers like Citigroup Inc. — devalued its portfolio by $1.3 billion.

CEO Jamie Dimon also attributed the bank’s profit decline to worse-than-expected results in home equity loans.

In anticipation of more problems with U.S. consumers’ ability to pay back their loans, the bank boosted its provisions for loan losses by $2.54 billion. That boost was higher than the $1.79 billion added during the third quarter and the $1.13 billion added in the fourth quarter a year ago.

Deterioration in subprime and home equity lending sent JPMorgan’s net income down to $2.97 billion, or 86 cents a share, in the October-December period, from $4.53 billion, or $1.26 a share, in the same period a year earlier.

Revenue rose to $17.38 billion from $16.19 billion the prior year.

Analysts polled by Thomson Financial, on average, predicted fourth-quarter earnings of 93 cents per share on revenue of $17.05 billion.

But its shares rose 61 cents, or 1.6 percent, to $39.78 in premarket trading Wednesday. Its shares have fallen about 5 percent during the fourth quarter.

The investment bank’s profit plunged 88 percent to $124 million, and the card services’ segment’s profit fell 15 percent to $609 million as JPMorgan socked money away in preparation for rising default and delinquency rates in credit cards.

Not all the bank’s operations performed poorly.

Commercial banking profit rose 13 percent to $288 million, Treasury and security services profit rose 65 percent to a record $422 million, and asset management profit rose 29 percent to a record $527 million.

And retail financial services edged up 5 percent to $752 million, as improvements in mortgage banking offset weakness in auto lending and regional banking.

Excluding the effect of a $633 million gain during the fourth quarter of 2006 from the sale of some trust businesses, the New York-based financial services company’s quarterly profit decline came to 21 percent.

For the full year, JPMorgan’s net income in 2007 was a record $15.4 billion, or $4.38 a share, on record revenue of $71.4 billion.

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Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
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Low Interest Cards 13.83%
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