JPMorgan Chase Profits Down, but Still Some Cheer

October 15, 2008 Updated: October 15, 2008

NEW YORK—Third quarter profits at JPMorgan Chase & Co., one of the few survivors of the brutal financial crisis, were down by 84 percent, to $14.7 billion. The New York-based bank was hit hard by billions of dollars in write-downs from its takeover of Washington Mutual, along with failing mortgage investments and home loans.

JPMorgan's investment bank unit wrote down around $3.6 billion in mortgage investments and lending exposures. The figure included troubled assets from Bear Stearns. It also boosted loan loss reserves by $1.3 billion to $19 billion which covers its takeover of WaMu.

CEO Jamie Dimon addressed a conference call during which he stated his expectation that the Washington Mutual takeover would start adding to earnings next year.

Meanwhile, JPMorgan Chase is still offering loans, but in a more disciplined way now compared to before the credit crisis hit.

Last month, Dimon engineered a JPMorgan Chase takeover of the ailing savings and loan WaMu, which was left dry by repeated bank runs. The Federal Deposit Insurance Corp. (FDIC) sold WaMu—the largest bank ever to fail in U.S. history—to JPMorgan for $1.9 billion.

The WaMu takeover came less than six months after a takeover of Bear Stearns, which JPMorgan acquired for $10 per share, backed by a non-secured loan of $29 billion by the Federal Reserve.

JPMorgan reported an after-tax loss of $642 million, mostly due to exposure to Fannie Mae and Freddie Mac, both government-sponsored enterprises that were taken over by the Fed earlier this year.

The losses were partly offset by growth in the bank's commercial banking and Treasury and security services, as well as through money raised through sales of stock as well as reduced deferred tax.

CEO Dimon commented on the U.S. Treasury's plan to spend $250 billion to buy stakes in major institutions saying that JPMorgan "didn't need the money" but didn't want to "stand in the way" either.