Morgan Issues Warning on Earnings
J.P. Morgan & Co., one of the nation’s biggest banks, said Wednesday that its earnings in the current quarter have been hurt by global financial market turmoil.
J.P. Morgan became the second big bank to concede that the turmoil in Asia and elsewhere will take a toll on this year’s revenue and profit.
The warning hurt bank stocks and prompted Wall Street analysts to predict similar forecasts from J.P. Morgan’s peers in coming weeks.
“Despite continuing progress toward strategic business objectives, earnings for the first two months of the 1997 fourth quarter were adversely affected by unsettled market conditions globally, which resulted in lower levels of client activity and lower trading revenues,” the New York-based bank said.
J.P. Morgan, which has offices in more than 30 countries and assets of $270 billion, gets 40% of its profit from trading, more than any other U.S. bank. Its stock fell $5 to close at $117.88 in New York Stock Exchange trading, leading the Dow Jones industrial average to its third straight decline.
J.P. Morgan’s warning came about a month after Chase Manhattan Corp. issued a similar forecast. Chase said in November that trading losses in October may threaten its goal of 15% growth in operating earnings per share for the year.
J.P. Morgan, in its warning, declined to forecast what the net effect of the trading revenue shortfall would be.
Wall Street analysts had expected Morgan to earn $1.97 a share for the fourth quarter. Analysts, who say they have been unable to get more details from the company, said it is too soon to know if the forecast needs adjustment.
In last year’s fourth quarter, J.P. Morgan earned $419 million, or $2.04 a share.
“This is quite a revelation,” Gerard Klauer analyst George Salem said. “The important thing here is it reminds everybody that the revenue shortfall from the Asian turmoil is more important than” problem loans.
“I don’t think this was unexpected, particularly given the warning that Chase put out last month,” said another analyst, who spoke on condition of anonymity.
The analysts agreed that Morgan and Chase will not be the only big banks adversely affected by troubled markets in Asia and Latin America, though perhaps not to the same degree.
“All the others will feel compelled to comment on this in the next few weeks,” Salem said. “Asia is so big, it touches everything.”
Other bank shares also fell. Chase Manhattan lost $3.63 to close at $112.25, Bankers Trust New York fell $1.63 to close at $127.56, Citicorp slid $5.88 to close at $132 and BankAmerica dropped $2.31 to close at $78.50, all in NYSE trading.
