JPMorgan Chase profit warning

The Board of Directors of J.P. Morgan Chase & Co. yesterday declared a quarterly dividend of $0.34 per share on the outstanding shares of the companyÂ's common stock.

The dividend is payable on October 31, 2002 to shareholders of record at the close of business on October 5, 2002. The Board expressed its intent to continue the current dividend level, provided that capital ratios remain strong and earnings prospects exceed the current dividend.

The company also stated that it expects third quarter earnings to be well below second quarter 2002 operating earnings of $0.58 per common share. The anticipated decline is primarily a result of high commercial credit costs concentrated in the telecom and cable sectors, and a weak trading performance.

'We are very disappointed with these results,' said William B. Harrison, Jr., Chairman and Chief Executive Officer. 'As much as we have focused on reducing credit portfolio concentrations in recent years, it is clear that further reductions are necessary, and we will continue to address that issue as an integral part of our credit policies. Additionally, the company will continue to focus on managing expenses to adapt to current market opportunities.'

Commercial credit costs are expected to be approximately $1.4 billion in the quarter, up from $302 million in the second quarter of 2002. The anticipated increase includes significantly higher charge-offs, and a provision in excess of charge-offs, related to the commercial portfolio. Commercial nonperforming assets are expected to increase by approximately $1 billion. These developments primarily reflect adverse actions during the quarter by several firms in the telecom and cable sectors, and a more negative view of the outlook for other firms in these sectors. The credit quality of the remainder of the portfolio has not changed significantly since December 31, 2001.

Total trading revenues (including trading-related NII) in the Investment Bank were approximately $0.1 billion for the first two months of the quarter, compared with trading revenues (including trading-related NII) of $1.1 billion for the full 2002 second quarter. Trading revenues declined significantly due to less favorable results from trading positions in a challenging market environment, as well as the seasonal slowdown in client flow.

Partially offsetting the lower trading revenues were investment securities gains of $0.3 billion for the two months, reflecting securities sold in connection with the company’s overall interest rate management activities.

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(source: JP Morgan Chase)

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