Evidence that the fallout from America’s housing crisis has spread from mortgage-related investments to consumer loans mounted yesterday as JPMorgan Chase quadrupled the bad-debt provision at its retail bank.

Jamie Dimon, JPMorgan’s chief executive, gave warning that he was “extremely cautious as we enter 2008” as he set aside $1.1 billion (£560 million) to cover losses on high-risk sub-prime mortgages and home-equity loans, which use the borrower’s house as collateral.

The bank also disclosed a $1.3 billion loss relating to bonds and other investments in sub-prime mortgages in the fourth quarter. The moves dragged profits for the period down by 24 per cent to $2.97 billion. Revenues rose by 7 per cent to $17.2 billion.

The higher than expected provisions meant the fourth-quarter profit was the equivalent of 86 cents a share compared with analysts’ consensus estimate of 91 cents a share.

The profit was also hit by a 15 per cent fall in net income to $609 million at the credit card services division, which increased provisions for losses by 40 per cent. The sub-prime losses saw profits at the investment bank arm cut by 88 per cent to $124 million.

Mr Dimon, who joined the bank in 2004 and became chief executive two years later, 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.”

Brad Hintz, an analyst at Sanford Bernstein, said: “The sub-prime loss is not a material hit and is much lower than many of its rivals have taken. It is confirmation that Jamie has done a very credible job with risk management.

“When he joined, JPMorgan’s trading book was all over the place. There was really no predictability compared to the other brokerages, trading was so volatile.”

However, analysts were concerned by the jump in consumer bad debt, announced a day after Citigroup revealed a 62 per cent quarterly rise in losses in its mortgage portfolio. Citigroup also took a $3.31 billion charge for bad consumer loans in the fourth quarter compared with $127 million the year before.

Susan Roth Katzke, an analyst at Credit Suisse, cut her 2008 profit forecast for JPMorgan from $4.45 a share to $4.20 a share.

Shares in JPMorgan rose by $2.26, or 5.77 per cent, to $41.43 on Wall Street.

Rival bank Merrill Lynch reports its fourth-quarter figures today. Some analysts predict it will announce a $10 billion loss for the quarter and a sub-prime writedown of up to $20 billion.

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