JP Morgan Chase tops forecasts

NEW YORK (CNNMoney.com) -- Strength in investment banking helped JP Morgan Chase post record quarterly results Wednesday, but the financial services conglomerate reported a decline in retail banking profit.

The nation's third-largest financial services firm said its fourth-quarter net income soared 68 percent from the year-ago period to $4.5 billion, or $1.26 a share. Revenue climbed 14 percent to $16.9 billion from the same quarter last year.

Quarterly income from continuing operations came in at a record $3.9 billion, or $1.09 a share, up from $2.6 billion, or 74 cents a share on that basis, a year earlier. Analysts surveyed by earnings tracker First Call had forecast earnings per share of 95 cents.

Shares of JP Morgan Chase (down $0.17 to $48.22, Charts) drifted lower in morning trading amid an overall downturn in the market.

Underpinning the strong results was the company's investment banking division, which offers services like debt underwriting and M&A advising. A boom in corporate dealmaking helped the division rake in $4.7 billion in revenue and net income of $1 billion, up 51 percent from the year-ago period.

Retail banking, however, saw a decline in profit. Net income for the segment fell 11 percent from a year ago to $718 million.

CEO Jamie Dimon pledged to keep improving business across all of the bank's segments. "The firm is focused on driving improvement in performance through both continued cost discipline and investment in all areas of our franchise," he said in a statement.

JP Morgan Chase has been working to bring together its various divisions - which range from investment banking to retail deposits and card services - and shareholders started to see those efforts pay off in 2006. The stock gained 22 percent last year and was among the top performers on the blue-chip Dow.

But the solid results posted in 2006 could set the way for difficult comparisons for the company in the coming year. Analysts are expecting weaker earnings growth - just 8 percent in 2007 versus 26 percent last year, according to First Call.

But company executives offered a positive outlook, said Sandler O'Neill analyst Jeffery Harte, who has a "buy" rating on the stock. "They gave a pretty benign view on credit quality and there's decent momentum in a lot of their businesses," he said, adding that the company has been growing its deposits.

JP Morgan Chase is the first of the nation's big three banks to report results for the fourth quarter. No. 1 Citigroup (Charts) is due to report results Friday, while No. 2 Bank of America (Charts) is on tap to issue results on Tuesday. Analysts are forecasting much more narrow profit gains at those companies.

Harte does not own shares of JP Morgan Chase but his firm does business with the bank.

A kinder, gentler Lehman Brothers