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JP Morgan Chase tops 1Q
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April 18, 2001: 2:43 p.m. ET
Profits at JPM fall, but company beats estimates in first quarter since merger
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NEW YORK (CNNfn) - J.P. Morgan Chase & Co. reported better-than-expected first-quarter results Wednesday in its first quarter as a combined company.
The nation's No. 2 bank holding company, created by a Dec. 31 merger, earned $1.44 billion, or 70 cents a share, in the period excluding special items. That was four cents above the 66-cent-a-share consensus forecast of analysts surveyed by earnings tracker First Call.
The company would have earned $1.99 billion, or $1.01 a share, as a combined company in the year-earlier period.
Including special items, latest-quarter net income came in at $1.2 billion, or 58 cents a diluted share.
"What you saw is a very strong trading quarter and you saw a strong quarter for some of the more traditional businesses," Chip Dickson, analyst at Lehman Bros., told CNNfn. "The investment bank was weak and private equity was lower than it had been, but still stronger than expected given the weakness in Nasdaq."
J.P. Morgan (JPM: up $3.67 to $49.04, Research, Estimates) said the value of its investment portfolio dropped on the market's plunge. This also cut profits from money management and securities brokerage, as well as fees for helping companies sell stock to investors.
The slowing U.S. economy left the bank with bad loans, after some corporate borrowers struggled to pay back debt.
"It's mostly capital markets-related," Andy Collins, an analyst at ING Barings, said of the drop in profit. "Private equity was a big swing factor, and expenses still need to come down a bit ... But it was a very strong trading quarter."
Further cost-cutting expected
The bank's executives also told reporters on a conference call J.P. Morgan Chase wants to cut costs this year to below last year's expense levels, partly by cutting jobs.
Many Wall Street firms are cutting staff as revenue evaporates in a stock market slump. J.P. Morgan Chase originally said it wanted to keep expense growth flat this year, and that it would cut about 5,000 jobs in its merger.
"We are looking for cuts that are larger than originally planned," said Chief Financial Officer Dina Dublon. "We're going to look for managing expenses to something lower than flat in comparison to last year ... I'm talking about expenses and, in part, about jobs as well. That's a major component of expenses."
ING Baring's Collins forecast the bank ultimately could cut more than 8,000 jobs.
The bank's first quarter earnings also were hurt as start-up companies in which J.P. Morgan Chase had taken early stakes failed to go public, hurting the value of its investment portfolio. A drop in the number of new stock offerings also curbed profits the company makes from managing such deals.
But Lehman's Dickson said an upturn in the markets would help the company's stock, a Dow Jones Industrial average component.
"We think this company more than most would be leveraged to an improvement in market conditions and lower rates," Dickson said. "Market activity comes back this company has a lot of operating leverage and it should show through on the bottom line."
Lehman has a "strong buy" recommendations on the stock with a price target of $65.
-- from staff and wire reports 
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