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JPMorgan Chase announces $5.1 billion sub-prime write-down

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by Kay Mitchell
”JPMorgan

Wall Street bank, JPMorgan Chase, announced a 50% fall in its first quarter profits as the bank was hit by a $5.1 billion (£2.5 billion) sub-prime write-down.

Revenue for the first quarter fell by 11% to $16.9 billion, marginally ahead of analysts who were expecting turnover at $16.8 billion.

America’s third biggest bank, which bailed out its rival Bear Stearns last month, warned that the credit squeeze was far from over.

Jamie Dimon, chief executive, said our expectation is for the economic environment to continue to be weak and for capital markets to remain under stress. These factors have affected, and are likely to continue to negatively impact, our firm’s credit losses, overall business and earnings, possibly through the remainder of the year or longer.

However, Mr Dimon’s statements contrast with that from Richard Fuld, Lehman Brothers chief executive, who told shareholders that the worst is behind us in the credit squeeze that has cost the biggest banks and brokerages in the US almost £125 billion.

It is believed that US investment banks, Citigroup and Merrill Lynch, are to announce further sub-prime write-downs totalling $15 billion (£7.6 billion) this week.

Citigroup is expected to take a $10 billion hit to its accounts which will take the bank to a first-quarter loss of nearly $3 billion. Many analysts believe Citigroup’s write-downs could reach as high as $12 billion.

Merrill is expected to announce a further $5 billion of write-downs which would push the bank $2.7 billion into the red, according to analysts. It is believed that Merrill will knock an additional 20% from the value of its sub-prime holdings, despite the fact that it revealed $18 billion of write-downs just 3 months ago.

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News posted: April 17, 2008

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