JPMorgan Chase & Co.’s profit fell 50 percent in the first quarter after the bank took a provision of $5.1 billion to strengthen its reserves by $2.5 billion and account for $2.6 billion in losses in its loan portfolio.
The New York-based bank, which recently bought the collapsing investment bank Bear Stearns, on Wednesday reported earnings of $2.37 billion, or 68 cents per share, and $16.9 billion in net revenue.
The profit was down from $4.79 billion, or $1.34 per share, in the first quarter of 2007. But it is above the average analyst forecast of 64 cents a share, according to Thomson Financial.
Investors appeared pleased about JPMorgan’s results, with stock futures turning sharply higher after the report was released.
Shares of JPMorgan closed Tuesday up 62 cents at $42.12, but are down about 3 percent since the beginning of the year.
JPMorgan’s CEO Jamie Dimon said in a statement that the bank expects the economy to stay weak and for the credit markets to remain under stress.
“These factors have affected, and are likely to continue to negatively impact, our firm’s credit losses, overall business volumes and earnings — possibly through the remainder of the year, or longer,” Dimon said. “However, we are prepared to manage through this down part of the economic cycle, given the strength of our liquidity, credit reserves, capital and operating margins, and to successfully position our company well for the future.”
Since the collapse of the mortgage market began slamming the banking industry last summer, JPMorgan has not been completely shielded from losses, given its large warehouse of various types of mortgages, home-equity loans, and loans used to finance leveraged buyouts. But compared to its peers, the bank has remained healthy.
JPMorgan agreed to buy Bear Stearns last month with the backing of the U.S. government for $10 a share. As of Monday, JPMorgan had built its stake in the Wall Street firm to 49.8 percent, according to a regulatory filing Tuesday — practically guaranteeing the deal will happen.