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Non-Tech : The Enron Scandal - Unmoderated -- Ignore unavailable to you. Want to Upgrade?

To: Sully- who wrote (355)	1/17/2002 5:47:32 PM
From: KLP	Respond to of 3602

Enron's Impact on Banks Grows J.P. Morgan Chase Takes $456 Million Hit; Citigroup's Toll Likely Large By Robert O'Harrow Jr. Washington Post Staff Writer Thursday, January 17, 2002; Page E01 NEW YORK, Jan. 16 -- The spreading impact of the Enron debacle on the financial services industry became clearer today, when J.P. Morgan Chase & Co. said it recorded losses of $456 million related to the beleaguered energy trader. The news came as part of a glum report on fourth-quarter earnings from the nation's second-largest bank, and as other financial service giants wrestle with how to handle billions of dollars in likely Enron-related losses. Some analysts believe that Citigroup and the Bank of New York will follow suit on Thursday and announce their own Enron-related charges. Citigroup officials have been silent about their exposure to Enron, but some analysts have put the figure near $1 billion. The Bank of New York could stand to lose $100 million or more. Some observers estimate the industry could lose $20 billion or more on bad loans, trading deals and other transactions as a result of Enron's bankruptcy filing last month. Analysts and government regulators said revelations about the industry's extensive financial dealings with Enron will continue to prove embarrassing. But because so much of that exposure is dispersed, analysts and government officials said, the long-term impact on individual banks or the financial system as a whole probably will be relatively minimal. "From our standpoint, it's a manageable situation," said one government banking official, who spoke on the condition of anonymity. "It's not something that threatens the safety and soundness of our banks." "It stings. Obviously, Enron was a very large customer," said Henry "Chip" Dickson, bank analyst at Lehman Brothers. "These things have caught up with them." Even after writing off a large portion of its Enron-related assets, the bank continues to carry more than $1 billion in "nonperforming assets" related to Enron -- one-quarter of the bank's total problem assets. In total, J.P. Morgan Chase has said it has a total exposure to the Houston company of about $2 billion. "There's a question mark," Dickson said. Enron is just part of the company's troubles. Exposure to Argentina reduced revenue and increased credit costs by another $351 million. The company said it lost $332 million (18 cents per share) in the fourth quarter, compared with net income of $708 million (34 cents) a year earlier. In addition to the Enron and Argentina losses, J.P. Morgan Chase took financial hits on restructuring and merger costs, larger provisions taken to cover potential bad loans, and losses in its venture capital business. For all of 20001, net income was $1.69 billion (80 cents), compared with $5.73 billion ($2.86) in 2000. J.P. Morgan Chase stock closed down $1.67 at $36.20. J.P. Morgan Chase chairman and chief executive William B. Harrison Jr. was direct about the role of Enron in results that were far below analysts expectations. "2001 was a challenging year for J.P. Morgan Chase, and our financial results clearly reflect the difficult operating environment," he said. "Fourth-quarter results were particularly affected by our exposure to private equity investments, and to Enron and Argentina." Enron's impact on the financial services industry has been sudden, and some critics have said that banks should have been more careful in reviewing the company's business model. Like most major banks, J.P. Morgan Chase both lent money to, traded with and took fees from Enron, so the hit is multitiered. But one government regulator monitoring the situation said that banks assumed Enron was operating legally, and so trusted the company's financial reports. "You get so much information you have to analyze. You assume it's valid," the regulator said. "The question is, how many more Enrons are out there." washingtonpost.com © 2002 The Washington Post Company