The credit crunch continued to dent the banking industry’s bottom line yesterday as JPMorgan announced $5.1 billion (£2.5 billion) of first-quarter writedowns and provisions and gave warning that its credit-related losses would probably continue to grow through the remainder of the year, or beyond.

JPMorgan, the third largest US bank, announced a 49 per cent decline in first-quarter profits as Wells Fargo, America’s fifth biggest bank, reported that it nearly tripled its provision against bad homeloans in the same period. The banks’ results came two days after Wachovia reported an unexpected first-quarter loss after America’s fourth biggest bank was forced into a $4.4 billion writedown relating to its portfolio of homeloans and mortgage-backed securities.

Nor will the carnage end there. Merrill Lynch is expected to announce today a writedown of between $4.5 billion and $8.5 billion, bringing its credit crunch-related losses to more than $30 billion and giving the firm its third consecutive quarterly loss.

Tomorrow, Citigroup is forecast to take a further $11 billion of writedowns, giving America’s biggest bank a total loss of $29 billion in the past three quarters as a result of the fallout from the housing crisis. JPMorgan, which agreed to buy Bear Stearns last month, yesterday reported that its first-quarter net income dropped from $4.79 billion to $2.37 billion, as the bank’s credit losses swelled from $1.6 billion last year to $5.11 billion.

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The credit losses included a $1.1 billion writedown relating to so-called home equity loans, or second mortgages, and a $1.2 billion writeoff on the value of prime and sub-prime homeloans. They also included a $1.1 billion writedown on so-called leveraged loans used to finance private equity deals. Although JPMorgan’s writedowns were significant, they were not as large as for many of its competitors and the group’s results came in slightly ahead of consensus analyst forecasts.

The group’s shares increased by $2.84, or 6.7 per cent, to close at $44.96.

Jamie Dimon, JPMorgan’s chief executive, said: “Our expectation is for the economic environment to continue to be weak and for the capital markets to remain under stress.

“These factors have affected, and are likely to continue to negatively impact, our firm’s credit losses, overall business volumes and earnings — possibly through the remainder of the year, or longer,” he added. However, Mr Dimon did say that he believed the credit-market crisis was at least 50 per cent over, if not 80 per cent.

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