Chase, J.P. Morgan issue joint fourth-quarter warning, plan to cut 5,000 jobs
By Associated Press, 12/14/2000 09:36
NEW YORK (AP) Chase Manhattan Corp. and J.P. Morgan & Co., which are combining to form one of the nation's largest banking companies, issued a joint fourth-quarter earnings warning Thursday, citing higher expenses and a difficult capital markets.
The companies also said they plan to eliminate up to 5,000 jobs once the two banks are integrated, increasing the total from a previous estimate of 3,200 jobs.
Despite the warning, the company said it was on track to complete the $35 billion deal, which is combining two of the world's pre-eminent names in finance, by the end of the year.
Chase and J.P. Morgan did not provide an earnings estimate, other than to say that results would be ''substantially lower'' than third quarter results and below analysts' fourth-quarter estimates.
In the third quarter, J.P. Morgan earned $2.77 per share; according to a consensus estimate of analysts surveyed by First Call/Thomson Financial, it was expected to earn $2.62 per share in the fourth quarter. Chase earned 68 cents per share in the third quarter and was projected to earn 78 cents per share this quarter.
In early trading on the New York Stock Exchange, shares of Chase fell $2.25 to $42.25, while shares of J.P. Morgan fell $7.75 to $156.50.
Total trading revenues for both firms will be lower than the year-ago quarter, in large part due to what the banks called ''a challenging market environment, including low volatility in currency markets, wider credit spreads and a decline in customer volumes,'' the banks said.
Higher cash expenses for the quarter will also contribute to the earnings miss, they said.
The companies plan to issues a joint earnings release Jan. 17.
Chase and J.P. Morgan apparently are not suffering from a problem hurting other lending institutions: bad credit. While in general, they did see ''deterioration in the external credit environment,'' they emphasized that their credit portfolios were performing ''relatively well.''
Earlier this month, Charlotte, N.C.-based Bank of America Corp. blamed high credit costs and nonperforming domestic corporate loans for its own disappointing earnings forecast.
Chase and J.P. Morgan, both based in New York, have scheduled votes by their shareholders for Dec. 22. As part of their combination, up to 5,000 jobs will be cut, the companies said. Chase currently employs about 79,000 people, while J.P. Morgan employs about 16,000.
By 2002, the companies project the new J.P. Morgan Chase and Co. to save nearly $3 billion a year in merger synergies, assuming a return to a more normal market environment.
Chase, known mainly as a commercial bank, is buying J.P. Morgan to expand its reach in the lucrative arena of stock underwriting and asset management for big businesses and wealthy clients.
It will have about $668 billion in assets, rivaling Bank of America Corp., with about $679 billion in assets, as the second-largest bank holding company in the United States. It will trail Citigroup, which had $791 billion in assets as of June 30.
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