JPMorgan sees more market stress

JPMorgan Chase (JPM) keeps rolling along. The New York bank met Wall Street’s estimates Wednesday despite a 49% drop in first-quarter earnings. JPMorgan made $2.4 billion, or 68 cents a share, for the quarter ended March 31, down from the year-ago $4.8 billion, or $1.34 a share. The latest quarter included $1.5 billion in pretax sale proceeds on the initial public offering of shares of Visa (V), as well as a $2.5 billion addition to reserves for future credit losses. JPMorgan said its investment bank took markdowns of $2.6 billion, including markdowns on leveraged lending and prime, Alt-A and subprime mortgages.

The investment bank swung to a first-quarter loss of $87 million from a year-ago profit of $1.54 billion, while revenue dropped 52% from a year ago to $3 billion. JPMorgan attributed those declines to weak underwriting results and markdowns, offset partially by record revenue in rates and currencies.

“The Investment Bank had markdowns related to leveraged lending and mortgages and increased loan loss reserves,” said CEO Jamie Dimon. “Retail Financial Services again increased loan loss reserves related to home equity and subprime mortgages, as performance in these portfolios continued to deteriorate.”

The comments come on the heels of a surprise first-quarter loss at Wachovia (WB), which sharply increased its provisions for future credit losses. JPMorgan said its provisions for credit losses rose as well, but so far the firm hasn’t needed to resort to the dividend cuts and capital-raising seen at other big banks. Shares rose 3% in early trading.

“Our expectation is for the economic environment to continue to be weak and for the capital markets to remain under stress,” Dimon said. “These factors have affected, and are likely to continue to negatively impact, our firm’s credit losses, overall business volumes and earnings — possibly through the remainder of the year, or longer. However, we are prepared to manage through this down part of the economic cycle, given the strength of our liquidity, credit reserves, capital and operating margins, and to successfully position our company well for the future.”