Profits at J P Morgan Chase & Co. Inc. fell 18 per cent in the first quarter of 2002, a slide due in part to the second largest US bank holding company's letter of credit (L/C) exposure to collapsed energy giant, Enron.

The bank reported first quarter net earnings of US$982 compared with US$1.20 billion in the same period last year. Sluggish capital markets have hit J P Morgan, which has also seen a drop in fees from advising corporate clients on mergers and large problem loans.

Enron exposure

Non-performing assets, or loans with potential repayment problems, had reached US$4.31 billion by the end of the first quarter, including US$1.13 billion related to Enron surety bonds and a L/C. Non-performing assets stood at US$2.79 billion at the end of last year.

In the wake of the Enron collapse, J P Morgan said a European financial institution, which it would not identify, had failed to make payment on a US$165 million L/C backing an Enron-related swap contract. The bank said it would seek enforcement of the L/C.

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