JPMorgan: Prime Loans Form Dark Cloud

Updated from 2:55 p.m. EDT

JPMorgan Chase(JPM Quote) has found a new source of trouble -- its prime mortgage portfolio.

The banking titan said Thursday that it could see losses as high as $300 million a quarter by sometime in 2009 in its $47 billion prime loan portfolio, triple from current levels.

CEO Jamie Dimon attributed the rise in prime loans written off to a surge in high loan-to-value jumbo loans gone bad as a result of the poor housing markets.

"We started doing more jumbo [mortgages] in '07 and part of that is '07 vintage... and we were wrong. We obviously wish we hadn't done it," Dimon said in a conference call to discuss earnings results this morning. "Prime looks terrible."

"It's exactly the same risk factors and all the other things," that contributed to rising losses in subprime and home equity loans, the CEO added, including high loan-to-value loans, stated income loans, and particularly troubled states including California, Florida and Arizona. "They're staggering numbers."

Additionally, JPMorgan's subprime losses could rise significantly to roughly $350 million a quarter in the same time frame, CFO Mike Cavanagh said also during the firm's conference call.

The bleak news did little to take the shine off the bank's second-quarter earnings report, which beat consensus estimates by 10 cents a share. Dimon is notorious for being overly cautious in his outlook and public statements. His sharp comments regarding prime mortgages could be a way to manage investor and analyst expectations as the bank trudges through the troubled housing and credit environment. The stock was rising 10.49% to $39.71 in recent trading.

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