Updated from 8:40 a.m. EST
J.P. Morgan Chase
, the nation's second-largest bank, threw cold water on the recent enthusiasm for financial stocks Wednesday, reporting disappointing fourth-quarter earnings.
, the nation's fifth-largest bank, said it plans to cut up to 4,000 jobs by 2007.
Profit at New York-based J.P. Morgan fell 11% from a year ago, due mainly to a $650 million charge stemming from its acquisition of
In the quarter, J.P. Morgan Chase earned $1.67 billion, or 46 cents a share, compared with $1.86 billion, or 89 cents a share, in the year-ago period. Last year's figures did not include results from Bank One's operations.
The earnings-per-share comparison with a year ago was impacted by J.P. Morgan's issuance of stock to finance the Bank One deal. In early trading, the stock was down 46 cents, or 1.2%, to $37.94.
On an operating basis that excludes a hefty charge stemming from the $58 billion merger with Bank One, J.P. Morgan reported earnings of $2.3 billion, or 64 cents a share. Using that earnings metric, the big bank fell 4 cents short of the Thomson Financial consensus per-share estimate.
J.P. Morgan also fell short of analyst estimates on revenue. In the quarter, net revenue was $12.95 million, compared to the analyst estimate of $13.3 billion.
On Tuesday, in the wake of a positive earnings announcement from
Bank of America
and several other banks, investors had bid up J.P. Morgan shares 1.6% to $38.40, on the expectation of more good earnings news to come. Wednesday's numbers are likely to disappoint. Even J.P. Morgan executives expressed some displeasure in the earnings release.
"Operating results for the fourth quarter improved from the third quarter, but still reflected mixed performance,'' said William Harrison Jr., the bank's chairman and chief executive.
Operating earnings from investment banking fell 43% from a year ago on a pro forma basis to $660 million. The bank attributed the slide to a 24% increase in expenses, mainly salaries. The bank also said "reduced equities market results negatively effected revenues.''
The bank reported trading revenue of $611 million, down 19% from a year ago. However, trading revenue rose 50% from the third quarter of this year, which was a horrific one for J.P. Morgan's trading desk and led to the ouster of several executives.
In the most obvious sign that the acquisition of Bank One is adding to the company's bottom line, credit card revenue rose 166% from a year ago to $1.8 billion. Bank One had been one of the nation's biggest credit card issuers.
In other bank news, Wachovia said it expects to eliminate up to 4,000 jobs, or 4% of its workforce, over the next two years to cut expenses by $1 billion. The cuts are related to the bank's acquisition of Southtrust.
The Charlotte, N.C.-based bank also reported that fourth-quarter profits rose 32% from a year ago. In the quarter, the bank earned $1.45 billion, or 95 cents a share, up from $1.1 billion, or 83 cents a share, in the year-earlier period.
On an operating basis, which excluded merger costs, Wachovia earned 99 cents a share, beating the Thomson Financial consensus by a penny.
Other banks reporting on Wednesday include
Bank of New York
, which reports after the market's close.
BONY, the nation's oldest bank, earned $351 million, or 45 cents a share, up from $307 million, or 40 cents a share, a year earlier. The bank's results included a charge of 4 cents a share related to merger costs, and 3 cents a share for litigation-related costs.
The Thomson Financial consensus had the bank earning 48 cents a share. It's not clear if analysts had factored in the litigation and merger charges.