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NEW YORK (CNNMoney) -- JPMorgan reported a sharp drop in quarterly earnings Friday morning, hit by big losses from its investment banking and trading divisions.
The nation's largest bank by assets said it earned $3.7 billion, or 90 cents per share, in the final three months of 2011. The results were in line with estimates but down 23% from $4.8 billion, or $1.12 per share, in the same period a year ago.
Shares of JPMorgan (JPM, Fortune 500) fell 2.9% ahead of the opening bell.
JPMorgan continued to struggle with declining profits in its investment banking and asset management divisions.
Net income from investment banking fell 52% to $726 billion. The drop reflects a $567 million loss related to a narrowing of the spreads between interest rates on certain assets.
Excluding those so-called debit valuation adjustments, or DVA, JPMorgan said its investment banking division would have earned $1.1 billion.
Earlier this year, JPMorgan and other major U.S. banks had benefited from such adjustments.
"As we have consistently said, whether positive or negative, we do not consider DVA reflective of the underlying operations of the company," said JPMorgan CEO Jamie Dimon in a statement.
Meanwhile, net income from JPMorgan's asset management business sank 40% to $302 million in the fourth quarter.
On the bright side, Dimon said the bank is beginning to see signs of improvement in loan demand and credit quality as the economy continues to recover.
JPMorgan said its real estate portfolio lost $11 million in the fourth quarter, compared with a loss of $823 million a year ago.
In addition, the bank set aside $646 million as a provision for losses in its real estate portfolio. That's down from a provision of $2.3 billion in the same period a year ago.
For the full year, JPMorgan reported net income of $19 billion, or $4.48 a share, up from $17.4 billion $3.96 a share, in 2010. Analysts were expecting $4.81 a share. Shares of major U.S. banks, which were among the worst performers last year, have had a nice bounce since the new year started.
Investors have been regaining some appetite for risky investments and bank stocks are considered cheap. But the outlook for the sector remains clouded by the sluggish economy, ongoing problems in the housing market and a host of new government regulations that could hit banks' most profitable business lines.
JPMorgan is the first major U.S. bank to release results in what is expected to be a mixed quarter for the financial services sector. Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), Goldman Sachs (GS, Fortune 500), Wells Fargo (WFC, Fortune 500) and Morgan Stanley (MS, Fortune 500) will release quarterly statements in the next few weeks.�
First Published: January 13, 2012: 7:22 AM ET
Source: http://rss.cnn.com/~r/rss/money_topstories/~3/HiifKOzT5_Y/index.htm
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