NEW YORK (Reuters) - JPMorgan Chase & Co JPM.N expects to report a $1 billion second-quarter gain related to the Bear Stearns Cos BSC.N takeover, JPMorgan Chief Executive Jamie Dimon said on Monday, though some merger benefits will be less than predicted while some losses will drag on results.
Dimon also told a UBS investor conference that JPMorgan has identified positions for 40 percent of Bear’s nearly 14,000 employees. To date, 75 percent of people decisions from the merger have been completed.
JPMorgan has already realized $200 million of losses reflecting its 49.5 percent ownership of Bear since April 8, Dimon said. He warned that JPMorgan expects about $200 million of further Bear losses.
The projected $1 billion gain reflects the addition of Bear Stearns capital, offset by roughly $9 billion of losses reflecting asset sales, purchase accounting, restructuring, litigation costs and Bear’s second-quarter losses.
Dimon also disclosed that JPMorgan now expects its total equity to rise by $2 billion, substantially less than the $5 billion increase previously forecast. Dimon also projected $900 million in merger expenses through 2009.
Yet Dimon remained upbeat about the deal, which was orchestrated by Federal Reserve officials who worried Bear was in danger of going bankrupt in mid-March. JPMorgan initially agreed to pay just $2 a share for Bear, but later lifted that to $10 a share, or roughly $1.5 billion in total.
In the short run, integrating Bear’s asset management and brokerage businesses will reduce earnings through next year, Dimon said. JPMorgan intends to close down “a big chunk” of Bear’s asset management, while the bigger bank was forced to pay hefty bonuses to retain Bear’s productive brokers.
Longer term, Dimon said Bear’s investment bank would generate between $800 million and $1.13 billion of earnings for JPMorgan.
JPMorgan also disclosed that Bear’s balance sheet has been reduced substantially since JPMorgan announced its takeover in mid-March.
Total risk-weighted assets fell to $150 billion from $225 billion, led by reductions in mortgage and credit trading positions, and that figure is expected to shrink further to $95 billion.
Prime brokerage assets, down 25 percent to $30 billion, are expected to rebound to $50 billion, he said. Total Bear assets of $410 billion fell by nearly half to $225 billion since March 17, Dimon said.
Editing by Braden Reddall
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