J.P. Morgan Chase & Co. reported generated net income of US$5.6 billion for fiscal 2008, although fourth quarter profits were just over US$700 million, the Wall Street financial services giant said Thursday.

Fourth quarter results were hampered by a series of unusual items, including a US$4.1 billion increase to loan loss reserves, and a US$2.9 billion net markdown due to leveraged lending exposures and mortgage-related positions in the investment bank.

CEO Jamie Dimon, said, “Our fourth-quarter financial results were very disappointing, driven by a loss in Investment Banking largely attributable to continued markdowns on leveraged loans and mortgage trading positions, as well as weak trading results. We also faced higher credit costs associated with continued deterioration across our loan portfolios, including a US$4.1 billion addition to loan loss reserves.”

Nevertheless, Dimon said that it continued to see underlying growth in many business areas, and he stressed that the integration of Washington Mutual has progressed well.

As of December 31, 2008, the firm reported a Tier 1 capital ratio of 10.8%. During the year, the firm increased its total allowance for loan losses to US$23.2 billion. Dimon commented, “While the diversified nature of our franchise and strong capital position have enabled us to weather the recessionary environment so far, we added US$13.9 billion to our allowance for loan losses in 2008 to keep this important component of our fortress balance sheet firmly intact.”

Looking ahead to 2009, Dimon continued, “If the economic environment deteriorates further, which is a distinct possibility, it is reasonable to expect additional negative impact on our market-related businesses, continued higher loan losses and increases to our credit reserves.”

“We are doing our part to help stabilize the financial markets and hasten recovery,” Dimon stressed, pointing to its takeovers of Bear Stearns and Washington Mutual, and he noted that it extended more than US$100 billion in new credit in the fourth quarter alone, and is working to limit home foreclosures.

IE