[R]9:00AM New York - JPMorgan Chase & Co. fourth quarter earnings fell 34%, as the company wrote down $1.3 billion in mortgage related bad debt.[/R]

JPMorgan Chase & Co. reported fourth quarter net earnings fell 34% to $3 billion compared with $4.5 billion posted in the year-ago quarter.

The third largest U.S. bank took a hit of $1.3 billion from subprime mortgage-related lending, which reduced profits.

The subprime loss, however, was much smaller than at other banks. Citigroup Inc. reported a net loss of $9.83 billion Tuesday after writing off $18.1 billion of bad loans.

For the quarter, earnings declined 32% to 86 cents per share from $1.26 per share a year earlier.

Analysts polled by Thomson Financial had estimated per share earnings of 92 cents on revenues of $17.1 billion.

JPMorgan said fourth quarter revenues climbed 8% to $17.38 billion from $16.19 billion posted same period in 2006.

Chief executive Jamie Dimon said the bank had set aside $2.54 billion in anticipation of further losses stemming from defaults on home loans and credit card repayments.

This was more than the $1.79 billion it set aside in the previous quarter, and comes as consumers have to deal with falling house prices, and higher energy and petrol costs.

For the year ended December 31, 2007, JPMorgan reported a revenues increase of 15% to $71.37 billion from $61.99 billion a year ago.

Earnings rose 6% to $15.36 billion or $4.38 per share from $14.4 billion or $4.04 per share in 2006.

During the quarter, JP Morgan''s investment bank division was worst affected, with its profits slumping 88% to $124 million. Investment banking fees rose 5% to $1.7 billion.

The company's credit card services arm was also hit, with profit down 15% to $609 million.

Profit in the treasury and asset management units rose. Commercial banking profit gained 13% to $288 million, Treasury and security services profit rose 65% to a record $422 million, and asset management profit rose 29 percent to a record $527 million.

In the retail financial services division, profit lifted higher 5% to $752 million, as improvements in mortgage banking offset weakness in auto lending and regional banking.

Going forward, Dimon said: “We remain extremely cautious as we enter 2008. If the economy weakens substantially from here – for which, as a company, we need to be prepared – it will negatively affect business volumes and drive credit costs higher.”

JPMorgan shares rose $1.57 or 4% to $40.74 in early morning trade Wednesday.

In the fourth quarter, the stock gained 5% and has traded in the range $38.54 to $53.25 over the past 52 weeks.

Analysts are now targeting a one-year price of $52.66.

Several banking institutions including, Citigroup, Merrill Lynch, Lehman Brothers, Goldman Sachs amongst others have reported losses from the housing market crisis. The losses now top $100 billion.