JPMorgan notches up $2bn but is downbeat on future

JPMorgan managed to make profit of $2 billion (£999 million) in the last three months despite the global banking crisis, but chief executive Jamie Dimon was hardly optimistic about the future.

The second-quarter result beat Wall Street expectations but was still less than half the figure for the same period a year ago.

Dimon said: "Our earnings were down significantly due to the unfavourable credit environment and market conditions. Our expectation is for the economic environment to continue to be weak - and likely to get weaker - and for the capital markets to remain under stress.

"We remain conscious that since substantial-risks still remain on our balance-sheets, these factors will likely affect our business for the remainder of the year or longer."

JPMorgan set aside another $1.3 billion to deal with losses from the subprime mortgage crisis and other financial difficulties, taking the total to $13.9 billion. Its shares have fallen by a third in the past year, but that is a much better performance than its peers can boast.

Citigroup shares are down 70% and Bank of America more than 50%. That leaves JPMorgan as the biggest US bank by market value. It recently took over rival Bear Stearns, which seemed headed for liquidation.

Merger costs and JPMorgan's share of Bear's liabilities wiped $540 million from the profit figures. Dimon praised the efforts of his staff "in extremely difficult times" for managing the Bear integration. Return on equity, a key performance measure, fell from 14% to 6% in the quarter.

UK bank shares rallied on the JPMorgan numbers as investors saw hope that the worst of the credit crunch could be over. Royal Bank of Scotland was up 18½p at 183½p, Standard Chartered rose 129p to 1477p and Barclays went up 23½p to 290¼p.