April 19 (Bloomberg) -- JPMorgan Chase & Co., the second- biggest U.S. bank, may say tomorrow that its $58 billion Bank One Corp. acquisition lifted first-quarter profit by 23 percent.

Net income probably was $2.38 billion, according to 18 analysts surveyed by Thomson Financial. The Bank One takeover of last July may have diluted earnings per share to 69 cents from 92 cents a year earlier, analysts estimate.

James Dimon, JPMorgan's president and the appointed successor to Chief Executive Officer William Harrison, is cutting at least 12,000 jobs, or 7 percent of the workforce, shedding units and consolidating computer systems to save the combined company $3 billion annually by 2007. Meantime, he's spending $1.1 billion this year on new initiatives, including 150 new branches, and focusing on faster-growing businesses such as energy trading, hedge funds and consumer banking.

``Dimon has a lot on his plate,'' said William Rubin, a money manager at Dreyfus Corp., which oversees $160 billion and holds more than 9 million JPMorgan shares. ``It's not just cost cutting. It's repositioning the company, reinvesting, and shifting capital to divisions with the best growth prospects.''

JPMorgan has said a settlement with investors of WorldCom Inc., a former investment-banking client, trimmed first-quarter pretax profit by $900 million. The bank earned $1.93 billion in the first quarter of 2004. Including Bank One's results, the company would have had a profit of $3.03 billion.

Dimon has shed businesses such as manufactured-home lending and bought others, including a stake in hedge-fund firm Highbridge Capital Management. He's also ended contracts with suppliers such as First Data Corp. and International Business Machines Corp. to save money.

Underperforming Shares

The New York-based company had first-quarter revenue of about $13.8 billion, analysts estimate. In the short term, 2005 profit estimates and JPMorgan's shares may drift lower, according to Diane Merdian, an analyst at Keefe, Bruyette & Woods Inc. in San Francisco.

The stock declined 12 percent in the past year, compared with the 1.5 percent drop of the Philadelphia KBW Bank Index. The shares rose 71 cents to $34.64 in composite trading yesterday on the New York Stock Exchange.

``Estimates will be gradually ratcheted down over the next couple of quarters and the stock's performance could be lackluster over this period of adjusting expectations,'' wrote Merdian, who rates JPMorgan a ``market perform,'' in a note to clients. ``In effect, JPMorgan is spending much of this year's incremental cost savings on the company's future.''

Analyst Ratings

Analysts' estimates have missed JPMorgan's earnings by an average of 9.6 percent in the past five quarters, overestimating results in one quarter by as much as 18 percent and underestimating them by 15 percent in another period.

Dimon, 48, declined to be interviewed through company spokeswoman Kristin Lemkau.

Analysts expect the bank to earn $10.3 billion, or $2.97 a share, in 2005, according to Thomson Financial. Five analysts have reduced their estimates in the past 30 days.

Ten of the 22 analysts who track JPMorgan have a ``buy'' or ``outperform'' investment rating on the company's stock; 12 have a ``neutral'' ranking; and two have a ``sell'' or ``underperform'' rating, data compiled by Bloomberg show.

Dimon is slated to replace Harrison, 61, as CEO next year and the transition is well under way. Since agreeing to merge in January 2004, the company has installed executives such as Chief Financial Officer Michael Cavanagh, who worked for Dimon at both Bank One and Citigroup Inc. Dimon was Citigroup Chairman Sanford Weill's top lieutenant until his ouster in 1998.

``He is their future,'' said Jack Welch, the former CEO of General Electric Co., who has worked as a consultant to JPMorgan, in an interview. ``He's the new guy. It's his company.''

Dimon's Pay

JPMorgan paid Harrison $16 million last year, a 20 percent reduction from 2003. Dimon, who was Bank One's CEO before its sale to JPMorgan, got a 20 percent raise. He received $15 million in salary, bonus and stock options.

The bank agreed last month to pay $2 billion on claims it should have known WorldCom's books were fraudulent.

Operating earnings from the company's investment bank probably fell 29 percent to $956 million on lower revenue and higher compensation costs, according to Merrill Lynch & Co. analyst Guy Moszkowski. He predicted that revenue slipped 5.9 percent to $3.96 billion.

Consumer Banking

JPMorgan's retail banking business may have had a profit of $764 million, up 2.6 percent from the $744 million JPMorgan and Bank One earned a year ago, said Moszkowski, who rates the stock a ``buy.'' Revenue probably totaled $3.65 billion, little changed from the first quarter of 2004.

``We're now heading into some tough sledding with rates going up and credit as it is,'' said Steven Lampe, a money manager at Delaware Investments, which oversees $95 billion and owns 6.2 million JPMorgan shares.

The credit-card unit had operating earnings of $587 million, up 75 percent from a year earlier, Moszkowski predicted. Revenue rose 5.6 percent to $3.83 billion, he said.

Commercial-banking profit may have slipped 19 percent to $234 million, even as revenue gained 4.2 percent, according to Moszkowski's estimates.

JPMorgan's asset management and wealth management business, which includes the private bank and its mutual-fund unit, may have earned $215 million, down 6.1 percent from a year ago, he said. Revenue probably climbed 1.8 percent to $1.24 billion.

First-quarter losses from the corporate unit, where JPMorgan reports results from its buyout business, may have widened to $342 million, Moszkowski said. It lost $15 million a year ago.

To contact the reporter on this story: Justin Baer at jbaer1@bloomberg.net

Last Updated: April 19, 2005 01:21 EDT