J. P. Morgan Profit Drops 36%; Higher Interest Rates Blamed

J. P. Morgan & Co. became the first big U.S. money center bank to announce first-quarter earnings Wednesday when it reported a 36% drop in profit due to rising interest rates.

It said earnings in the first quarter fell to $180 million from $281 million in the year-earlier quarter, which contained a $43-million tax refund.

“Interest rates have risen significantly over the past 12 months, and recently the yield curves in the United States and other markets have either flattened or inverted, limiting the opportunities for profitable repositioning of interest rate exposures,” the company said. J. P. Morgan said these circumstances were also unfavorable for trading and other income-earning opportunities.

J. P. Morgan, which owns Morgan Guaranty Bank, also expects to receive permission to underwrite and deal in corporate debt soon, President Dennis Weatherstone told shareholders at the annual meeting.

“We shortly expect to have final authority to underwrite and deal in corporate debt in this country,” he said.

Commercial banks have been excluded from participating in securities underwriting activities in the United States since the 1930s. However the Federal Reserve Board this year allowed commercial banks to underwrite and deal in commercial paper, municipal revenue bonds and mortgage-backed securities.