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Sep 14, 2011, 08.24 AM IST
JPMorgan Chase & Co's trading revenue is running 30% lower this quarter than the previous period, while investment banking fees are likely to fall by about 50%, a senior executive said on Tuesday.
Lower market levels are also cutting into asset management revenue, and the bank is on track to report a modest loss in its private equity business, Jes Staley, JPMorgan's head of investment banking, said at a conference in New York.
The forecasts were grim enough to spur analysts to slash their third-quarter earnings for the bank. Analysts expect a weak third quarter for investment banks because of global stock market turmoil and the European debt crisis, and have been cutting their earnings estimates in recent weeks.
With just three weeks left in the quarter, global investment banking fees for all of Wall Street amounted to SD 11.2 billion, 51% less than for all of the second quarter, according to Thomson Reuters/Freeman Consulting.
JPMorgan's investment banking fees could be about USD 1 billion in the third quarter, Staley said, compared with USD 1.9 billion in the second quarter. Stock and bond trading revenue could drop by about a third from the second quarter.
The investment bank that Staley oversees is the largest of JPMorgan's six business segments, contributing nearly 40% of the company's USD 5.43 billion of second-quarter net income. He is widely seen as a possible successor to Chief Executive Officer Jamie Dimon.
Stand-alone investment banks like Goldman Sachs Group Inc are likely to suffer most from difficulties in that business.
The analysts' average estimate for Goldman's third-quarter earnings had fallen to USD 2.09 a share on Monday from USD 2.65 on Sept. 1, according to Thomson Reuters I/B/E/S.
Estimates for JPMorgan, which gets more of its business handling consumer accounts and lending directly to individuals and businesses, have slipped only a penny to USD 1.20 a share in that time.
Staley said the JPMorgan was "not worried" about its European loans. The bank had USD 14 billion of credit exposure to companies and countries in Europe as of the end of June. JPMorgan is the second-largest US bank, with USD 2.2 trillion of assets.
Staley added that the bank will report a "modest loss" on its private equity portfolio if current market conditions hold. He reaffirmed predictions that the bank will have additional litigation expenses in the quarter as it deals with claims from customers over its mortgage lending and mortgage securities businesses.
Credit Suisse analyst Moshe Orenbuch cut his third-quarter earnings forecast for JPMorgan to 81 cents per share from USD 1.22 after Staley spoke at a Barclays Capital financial services conference in New York. Citigroup's Keith Horowitz followed suit, cutting his estimate for the quarter to 95 cents per share from USD 1.17.
JPMorgan is usually the first major US bank to report quarterly earnings. Results are next due in October.
Shares of JPMorgan closed up 0.2% at USD 32.49 Tuesday. They have fallen about 23% year to date.
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