JP Morgan Announces Earnings Decline

by Stewart Douglas

Story link: JP Morgan Announces Earnings Decline

US investment bank JP Morgan has today announced that it has experienced a substantial decline in earnings over the final quarter of 2007 after further declines in the value of its sub-prime exposure, underlining the continuing difficulties for investment houses in the current external climate.

The bank announced today that its income net of costs had fallen by over a third as a result of the decrease in the value of its exposure to loans in the now-defunct sub-prime sector, reflecting the ongoing difficulties faced by investment banks in light of the sub-prime collapse and the underlying problems in the global economy.

Profits had fallen to $2.97 billion over the last quarter, down from $4.53 billion in the year previous, reflecting the extent of the losses revealed in the sub-prime securitisation arena, in line with similar results from other investment banks over the course of the last few weeks.

The news comes in a day which saw further unrest for the investment banking industry after Citigroup was forced to deal with the aftermath of a $10 billion loss over the same period, along with a 38% decline in earnings reported by Wells Fargo, reflecting the severity of the underlying market problems.

However, as compared to many of its competitors, JP Morgan has performed reasonably well, sustaining losses much less significant than the bulk of the market.  As a result, the JP Morgan share price was up by over 4%, despite the fact that its earnings decline significantly, suggesting that the market is aware of the depth of problems in the global finance markets at present.

The sub-prime crisis has sent shockwaves across global commerce, with investment portfolio across all industries feeling the heat from a lack of credit and a hostility towards lending at both a retail and commercial level, which has had a knock on effect on profitability.