J.P. Morgan Chase & Co.'s second-quarter profit fell 61% as the No. 2 U.S. bank wrote off $1 billion of investments in private companies and as fees from underwriting and trading securities dropped.
J.P. Morgan reported profit from operations dropped to $690 million, or 33 cents a share, from $1.76 billion, or 89 cents, a year earlier. That was below the lowest estimate of 55 cents among analysts surveyed by First Call/Thomson Financial. The average estimate was 65 cents.
The bank lost money on venture capital investments in a unit that Chief Executive William Harrison cited 18 months ago as a growth area. That caused quarterly earnings to fall below analysts' forecasts for the third time in the last year.
The company also said it plans to buy back $6 billion of its own stock. J.P. Morgan shares rose $1.28 to close at $43.58 on the New York Stock Exchange.
Losses at the bank's JPMorgan Partners venture capital arm stemmed from bankruptcies among privately held telecommunications companies. Competitors including Wells Fargo & Co. and FleetBoston Financial Corp. have also reported private-equity declines.
The total private-equity loss was $827 million, compared with a gain of $447 million a year ago and a peak gain of $1.62 billion in the fourth quarter of 1999. At that time, Harrison said Internet companies deserved the high stock prices they commanded, and expected venture capital investments to help drive profits faster than its traditional banking businesses.
Since then, Internet company shares have plunged, paring J.P. Morgan Chase's venture capital gains and leaving many privately held companies unable to go public. About 90 of the bank's 1,196 investments at the end of March had "dot-com" in their company names.
In other earnings news:
* No. 1 soft-drink maker Coca-Cola said second-quarter earnings rose 6.6% as sales gained in Asia and Africa and the company cut payroll and operating expenses.
Net income rose to $1.12 billion, or 45 cents a share, from profit from operations of $1.05 billion, or 42 cents. Sales fell 3.5% to $5.29 billion from $5.49 billion.
Chief Executive Doug Daft pledged to spend an extra $300 million to $400 million this year on marketing to spur sales worldwide.
Chief Financial Officer Gary Fayard said on a conference call that the company expects to meet the forecast.
Analysts expected Coca-Cola to earn 43 cents.
* ETrade Group Inc., the No. 2 online broker, said second-quarter profit from operations rose, as it cut expenses 20%. It earned $5.4 million, or 2 cents a share, from operations, compared with breaking even in the year-earlier period. ETrade was expected to earn 1 cent. Revenue fell 9% to $308 million.
* Former Philip Morris unit Kraft Foods Inc. said its net income fell 11% to $505 million, or 33 cents a share, from $568 million, or 39 cents, on interest costs and goodwill amortization related to Philip Morris' acquisition of Nabisco Holdings Corp. Had Nabisco been a part of Kraft all of last year, second-quarter profit would have risen 14%.
Kraft sales rose 25% to $8.69 billion.
* Philip Morris Cos.' second-quarter profit rose 5.4% as the biggest tobacco company raised cigarette prices and had higher volume sales in Europe and Asia.
Net income rose to $2.29 billion, or $1.03 a share, from $2.17 billion, or 95 cents, a year earlier, and matching estimates. Revenue rose 11% to $23.2 billion.
* Polaroid Corp. had a second-quarter loss of $109.9 million, or $2.36 a share, compared with net income of $26.6 million, or 59 cents, a year earlier. Sales fell 31% to $333.5 million.
Polaroid has lost money the last three quarters, and annual sales have been stagnant at about $2 billion for a decade as the appeal of digital cameras erodes sales of instant cameras and film. The company defaulted on its bonds Monday after halting interest payments as part of a plan to avert bankruptcy.
* Sears, Roebuck & Co.'s second-quarter earnings fell 13% as sales of the largest department-store company were hurt by cooler weather and a slowdown in consumer spending.
Profit from operations fell to $316 million, or 96 cents a share, from $365 million, or $1.05, a year earlier. Sales rose 2% to $10.2 billion.