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JPM: Revenue to fall
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June 6, 2001: 4:00 p.m. ET
Brokerage's revenue warning starts off a rough day for financial sector
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NEW YORK (CNNfn) - Market weakness continues to cut into J.P. Morgan Chase & Co.'s revenue, the company said in a filing Wednesday morning that sent its stock tumbling and started a day of warnings in the financial sector.
J.P. Morgan's trading revenue will slump below first-quarter levels in each of the remaining three quarters of 2001, the No. 2 U.S. bank holding company said in a filing with the Securities and Exchange Commission.
Separately, Bank One Corp. and money manager Neuberger Berman Inc. warned their second quarter earnings per share would miss Wall Street expectations.
Weak stock markets continue to plague three of J.P. Morgan's key businesses -- stock trading, investment banking, and the company's own investment portfolio. Fewer stock offerings and mergers mean less banking fees, while lower stock market volatility means the firm can't make as much money trading on share price movement.
J.P. Morgan reported trading revenue of $2.09 billion in the first quarter and earnings of $1.44 billion, or 70 cents a share. Analysts on average expected the company to earn 78 cents a share in the second quarter, according to earnings tracker First Call, but many cut their estimates based on the company's warning.
J.P. Morgan also said its investment banking fees for 2001 "will be largely tied to the level of market activity for (merger-and-acquisition, or M&A) advisory transactions and new issuance activity," but M&A and initial public offering (IPO) markets also were weak.
That weakness is hampering J.P. Morgan's ability to unload some investments, the company said. Recent gains in its publicly held portfolio have been offset by losses in private investments.
The filing was made before U.S. stock markets opened, and J.P. Morgan (JPM: down $1.70 to $46.80, Research, Estimates) shares were down nearly 4 percent in afternoon trading on the New York Stock Exchange.
Though Wall Street analysts cut their earnings estimates for the company, many still think J.P. Morgan is a bargain.
"We continue to believe investors would be better served focusing on J.P. Morgan's potential for 2002, the evidence of market share gain, and on signs of improving operating leverage apart from the private equity business," Merrill Lynch analyst Judah Kraushaar said. "We reaffirm our ("buy") rating and (our) view that J.P. Morgan is among the best values in (the sector)."
Bank One, Neuberger Berman warn
Separately, Bank One Corp., the No. 5 U.S. bank holding company, said credit deterioration and its decision to reduce credit exposure through voluntary loan sales would cause its earnings to equal or slightly exceed first-quarter earnings of 58 cents per share.
Wall Street analysts expected Bank One to earn 63 cents a share, according to First Call.
Investment adviser Neuberger Berman Inc. said its second-quarter earnings could also miss expectations. Private asset management fees for the quarter suffered from low asset levels at the end of the first quarter, and a sluggish transaction pace has cut into its commission revenue, the company said.
Analysts expected Neuberger Berman to earn 71 cents a share in the second quarter, according to First Call. The company said it still expected to meet expectations for full-year 2001 earnings per share of $2.95.
Shares of Bank One (ONE: down $0.08 to $38.97, Research, Estimates) were little changed, but Neuberger Berman (NEU: down $5.35 to $75.19, Research, Estimates) shares tumbled more than 5 percent. 
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