JPMorgan Chase & Co. eked out a fourth-quarter profit, but its results were anything but calming to investors worried about the mountain of upcoming losses in the troubled banking sector.
Defaults surged in a wide variety of loans, ranging from home loans to credit cards to commercial real estate loans. JPMorgan's investment bank was forced to mark down its portfolio by $2.9 billion. And had it not been for JPMorgan's acquisition of Washington Mutual Inc. late last year, the bank would have reported a net loss for the fourth quarter.
Even Chief Executive Jamie Dimon called the results "very disappointing."
Every financial institution is "struggling with this extreme environment," Dimon said Thursday. "We don't know exactly the outcome."
New York-based JPMorgan Chase reported a profit of $702 million, or 7 cents a share, down 76% from $2.97 billion, or 86 cents, a year earlier.
Analysts, who had been trimming their estimates in recent weeks, expected break-even results. Analyst estimates tend to exclude one-time items. The purchase of Washington Mutual -- which added massively to JPMorgan Chase's consumer banking business -- helped the company book a $1.1-billion gain, after taxes, from "merger-related items."
But corroding loans inherited from Washington Mutual, the largest bank ever to fail in U.S. history, are expected to mar JPMorgan's results this year. Moody's cited WaMu and its credit card portfolio as one reason it slashed Chase Bank's credit rating on Thursday.
The bank added $4.1 billion to loan loss reserves to account for future loan losses.
Shares fell $1.57, or 6.1%, to $24.34 after the earnings news.
For all of 2008, JPMorgan Chase posted a profit of $5.6 billion, or $1.37 a share. That was down from a record annual profit in 2007 of $15.4 billion, or $4.38.