updated 7/20/2005 11:57:04 AM ET 2005-07-20T15:57:04

JPMorgan Chase & Co., the nation’s third largest bank, on Wednesday reported second quarter earnings of $994 million, or 28 cents a share, beating reduced Wall Street earnings’ projections despite a sharp drop in trading revenue.

The results compared with a loss of $548 million, or 27 cents a share, a year earlier.

The New York-based bank said that the second-quarter results included a number of special charges, including a $1.9 billion litigation reserve after a settlement over the bank’s role in the collapse of Enron Corp. and $279 million in costs related to its merger last year with Bank One Corp.

Excluding the charges, earnings would have been $2.3 billion, or 66 cents a share.

Analysts surveyed by Thomson Financial had expected the bank to report earnings of 64 cents a share in the April-June period.

In early trading, the bank’s shares rose 21 cents to $35.42 on the New York Stock Exchange.

Analysts had reduced their earnings projections after the bank last month warned that trading revenues were going to be weak.

JPMorgan Chase said Wednesday that trading revenues for the second quarter were $614 million, down $622 million, or 50 percent, from a year earlier. Earlier in the week, the nation’s largest financial institution, Citigroup Inc., missed its second-quarter earnings target in part because of lower trading income in a difficult bond market.

Chief Financial Officer Mike Cavanagh told a conference call with reporters that “obviously we didn’t perform the way we’d like in the trading business.” He said market conditions “made it very challenging for traders to make money across many products and geographies,” especially in April and May.

But, he added, trading conditions turned “more favorable” in June and continued into the third quarter.

Revenues for the April-June period were $12.74 billion, down from $13.65 billion in the first quarter but up from $8.63 billion a year earlier.

Analysts had expected revenues of $13.43 billion, according to Thomson Financial.

William B. Harrison Jr., the bank’s chairman and chief executive officer, said in a statement accompanying the report that trading revenue was weak, as predicted.

He added: “Our other major businesses, however, reported good results, with card services, treasury and securities services, and asset and wealth management posting double- or triple-digit earnings growth, and investment banking fees remaining strong.”

James Dimon, the former CEO of Bank One who serves as president and chief operating officer of JPMorgan Chase, said integration of the two banks’ operations was on track. The merger was closed on July 1, 2004.

“In our first full year as a combined firm, we have made significant progress in all of our businesses, both in terms of integrating the ... franchises and in executing our growth strategy.”

Asked in a conference call with analysts when JPMorgan Chase might be ready for another big acquisition, Dimon said “I think by early next year, the company and the teams are ready to take on new challenges.”

Pressed on whether the bank might initiate deals this year in anticipation of closing them next year, Dimon said “you never say never,” but he added that there was still work to be done this year in merging Bank One’s operations into the combined bank.

In the hard-hit investment bank, earnings of $606 million in the second quarter were down from $644 million a year earlier.

JPMorgan Chase said “the disappointing trading performance reflected a challenging market environment.” It said it experienced “lower proprietary trading revenues due to fewer market opportunities and reduced client flows” as well as trading losses.

The strongest performance came in retail financial services, which earned $980 million in the second quarter compared with $396 million a year earlier, and card services, which earned $542 million in the April-June period, up from $176 million a year earlier.

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