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SAN FRANCISCO -- Argentina and



are not proving to be as threatening to the capital markets as Long Term Capital Management was purported to be. But they're still causing major headaches for some of the biggest names in finance.

Wednesday morning,

J.P. Morgan Chase

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

announced that crises at Enron and in Argentina had reduced its fourth-quarter revenues by $807 million, with $456 million from the former and $351 million from the latter. Shares of J.P. Morgan fell 4.4% Wednesday.

Thursday morning,


(C) - Get Citigroup Inc. Report

reported nearly $700 million in pretax losses from Enron and Argentina, $228 million from the former and $470 million from the latter. Today, Citigroup shares rose 2.1%.

The fact the market was down sharply Wednesday and up smartly today contributed to those divergent reactions. Citigroup slid 2.5% Wednesday and J.P. Morgan gained 1.8% today, rebounding along with major market averages. But it's pretty clear Citigroup was better able to manage its exposure to the era's big disasters than was J.P. Morgan.



the Enron and Argentina losses, J.P. Morgan reported operating earnings of 12 cents a share vs. the consensus estimates of 34 cents, and down 67.5% from a year ago -- itself a weaker-than-expected quarter. Including the losses, J.P. Morgan reported a net loss of 18 cents per share.

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its Enron and Argentina losses, Citigroup reported earnings of 74 cents per share, a penny better than expectations and up 16% from year-ago results.

The firms' results confirmed the decision made by Brett Gallagher, who runs $3 billion as head of U.S. equities at Julius Baer Asset Management, to sell J.P. Morgan and hold Citigroup, as noted here on

Dec. 17.

"I do think the quality of

J.P. Morgan's business isn't as strong as Citigroup's," Gallagher said today. "If I'm wrong about the economy,

Morgan's market-sensitive business will perform better and they'll get bailed out. But I'm pretty comfortable the economy is not going to be that strong, and don't see where J.P. Morgan is going to turn the ship around."

Julius Baer maintains a long position in Citigroup.

J.P. Morgan shares have recovered nearly all the ground lost in the wake of its disclosure of additional Enron exposure on

Dec. 20, causing Gallagher to fret that investors are saying "'this is in the past, the decks are cleared

and going forward we're seeing the economy gaining traction so we're almost willing to ignore it.' I don't think investors should be ignoring it."

Neither does Kathy Shanley of Gimme Credit, an independent research service on corporate bonds in Chicago. She noted that J.P. Morgan had $2.1 billion in exposure to Enron at the end of 2001, with $1.13 billion backed by surety contracts on which insurance companies thus far have refused payment.

J.P. Morgan maintains it will collect, but "with everyday bringing new revelations of nefarious deeds at Enron, we're sure the insurers will find ample fodder to press their case in court," Shanley wrote. "We wouldn't expect any near-term resolution of this uncertainty."

In addition to specific provisions for Enron and Argentina, for which J.P. Morgan's exposure totaled $483 million at year-end, the bank also announced -- "in response to deteriorating market conditions" -- a $510 million increase in its loan-loss reserves.

Almost in passing, Shanley noted that J.P. Morgan is one of the lead bankers for



, which is battling its own demons and bankruptcy rumors. The analyst also questioned how J.P. Morgan's plans to acquire an $8.2 billion "platinum" credit card portfolio from beleaguered

Providian Financial


is going to help the financial giant.

"What Providian considers 'platinum' would look more like tin in anyone else's portfolio, raising concerns J.P. Morgan is at risk of adding even more credit concerns on its already full plate," she wrote. "We continue to view J.P. Morgan as vulnerable to downgrade if current credit conditions persist, and see risk for additional pressure on credit spreads on

its paper."

As equity investors have painfully learned in recent years from cases such as Enron,


(AMZN) - Get, Inc. Report

and a handful of telecommunication firms, developments in the corporate bond market are often harbingers for the stocks.

Tracking Tyco

Speaking of which, shares of

Tyco International


fell 3.5% today amid myriad rumors and options expiration-related factors (which may not be mutually exclusive).

As I noted in's

Columnist Conversation, Tyco's credit spreads widened by 50 basis points in the prior two days before trading "a touch better today," according to a corporate debt trader. Tyco is now paying more for five-year credit protection than



, he noted, evoking the name of another company whose credit troubles presaged a fall in its common stock.

Meanwhile, Gimme Credit's Carol Levenson put a note out about Tyco yesterday. In a nutshell, she expressed concern that with its stock price down, Tyco will have to borrow more cash to pay for the acquisitions that are so key to the company maintaining its heady projected growth rates.

The concern being that higher borrowing will lead to a weaker balance sheet and possible ratings downgrade, something Tyco shareholders ought to be very concerned about.

Among the rumors buffeting Tyco shares today is that the company is planning a convertible bond offering, proceeds of which could be used to pad its cash horde, or for acquisitions. The company denied any such bond sale is in the offing, according to wire service reports.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.