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J.P. Morgan 4Q down
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January 16, 2002: 12:01 p.m. ET
Firm's profit sinks after exposure to Enron bankruptcy, Argentine crisis.
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NEW YORK (CNN/Money) - J.P. Morgan Chase & Co. Inc. reported a sharp drop in fourth-quarter earnings Wednesday, falling far short of Wall Street expectations mainly because of the company's exposure to bankrupt energy trader Enron Corp. and the Argentine economic crisis.
For the quarter ended Dec. 31, J.P. Morgan posted a profit of $247 million, or 12 cents a share, down from earnings of $763 million, or 37 cents a share, a year earlier. Analysts on average anticipated a profit of 34 cents a share, according to earnings tracker First Call.
"Fourth-quarter results were particularly affected by our exposure to private equity investments, and to Enron and Argentina," CEO William Harrison said in a statement. "2001 was a challenging year for J.P. Morgan Chase, and our financial results clearly reflect the difficult operating environment."
Morgan, the No. 2 U.S. bank, was a major creditor to Enron, the bankrupt energy trading company. And its trading revenue suffered when Argentina cut the value of its peso, which had for years been pegged on a one-to-one par with the U.S. dollar.
These two factors cut trading and other revenue by $807 million in the quarter, and Morgan raised its provisions to cover bad loans by another $510 million in response to a sluggish economy. Total fourth-quarter revenue fell to $6.8 billion from $7.6 billion.
"I think they're doing the right thing, getting it all out of the way here in the fourth quarter," Andy Collins, an analyst at U.S. Bancorp Piper Jaffray, told Reuters.
Separately, the No. 6 U.S. bank, Bank One Corp., reported fourth-quarter earnings of $765 million, or 65 cents a share, excluding one-time charges, compared with a loss of $512 million, or 44 cents a share, a year ago. Wall Street analysts expected Bank One to earn 65 cents a share, according to First Call.
Throughout 2001, banks suffered from a weak global economy and falling stock prices, leading to bad loans and lower trading revenue. J.P. Morgan, like several other banks, cut thousands of jobs in 2001 to try to cut costs and boost profitability.
Click here for more on the Enron collapse
Both Morgan and Bank One said they saw customers' ability to repay loans weaken in 2001 as the U.S. economy sank into recession, and both expect the situation to worsen in 2002.
"We do expect generally that non-performing assets will go up," Morgan Chief Financial Officer Dina Dublon said in a conference call. "We expect credit will continue to weaken."
That outlook didn't stop Morgan from buying the $8.2 billion Providian Master Trust credit card portfolio from its rival Providian Financial Corp. (PVN: down $0.37 to $4.42, Research, Estimates), in a deal announced Wednesday.
J.P. Morgan (JPM: down $1.01 to $36.86, Research, Estimates) and Bank One (ONE: down $0.41 to $38.19, Research, Estimates) shares fell in midday trading. 
-- from staff and wire reports
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