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JP Morgan feels private equity pain

The US bank has suffered a 61 per cent Q2 profit decrease, blaming difficult market conditions and “deterioration of private equity values”.

JP Morgan Chase has announced the worst performance results yet for the second quarter of this year, saying profits dropped 61 per cent from the comparable period last year.

The latest addition to a string of bad news coming from the leading US investment banks, JP Morgan said earnings per share were down $690m, or 33 cents per share, compared with $1.76bn (65 cents per share) last year.

William Harrison, the bank’s CEO and president, said the disappointing performance was a reflection of difficult market conditions. “We are not satisfied with our financial results, which have been negatively affected by weak markets and deterioration of private equity values”, Harrison commented.

The bank said that JPMorgan Partners, its private equity arm, had written down and written off $1.02bn, particularly from telecommunation investments made in 1999 and 2000.

The private equity operation has incurred losses of $827m in the second quarter, compared to gains of $447m a year ago.

JP Morgan’s earnings, which were also affected by disappointing M&A fee income, are worse than those published recently by rivals Goldman Sachs, where second quarter profits were down 24 per cent and Morgan Stanley (36 per cent).