JP Morgan Chase, the new employer of former Prime Minister, Tony Blair, today added to the US economic malaise by announcing a 34 per cent fall in fourth quarter profits and $1.3 billion in sub-prime mortgage related writedowns.

The Wall Street bank said profits fell from $4.53 billion to $2.97 billion but quarterly revenue increased by 7 per cent to $17.4 billion.

Jamie Dimon, chairman and chief executive at JP Morgan Chase, 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.”

Mr Blair confirmed last week that he had taken a job with JP Morgan Chase to provide political and strategic advice. He is expected to earn more than £500,000.

The US investment bank’s results follow yesterday’s figures from Citigroup which revealed a $9.8 billion loss – the largest in its 196-year history- as well as a $18.1 billion sub-prime asset writedown, a dividend cut and 4,200 redundancies.

Tomorrow, Merrill Lynch is expected to report further deterioration in asset value when it reports its fourth quarter results, after writing off $7.9 billion in the third quarter.

Yesterday, both Citigroup and Merrill announced they had secured more than $21 billion in capital funding from a range of overseas investors, including the Kuwait Investment Authority and the Singapore Government.

JP Morgan Chase has not sought out foreign investment and said today that it had added $2.3 billion to credit reserves, bringing the total to $10 billion.

Profits in the group’s investment banking division slumped by 88 per cent to $124 million and revenue fell by 35 per cent to $3.2 billion. Investment banking fees, which rose by 5 per cent to $1.7 billion, were largely offset by a fall in debt advisory fees which declined by 39 per cent.

Fixed income revenue fell by 70 per cent to $615 million due to $1.3 billion of writedowns on sub-prime-linked assets.

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