March 6 (Bloomberg) -- JPMorgan Chase & Co., the third- largest U.S. bank, will invest $1 billion to expand its investment bank this year and hire more energy traders in Europe and Asia.

Energy initiatives will add $100 million to $160 million in annual earnings as early as this year, said William Winters, co- head of investment banking, at the New York-based bank's annual investor presentation today. Co-manager Steven Black said JPMorgan plans to fund the spending in part by moving jobs to lower-cost locations.

``We've just started to become a highly efficient company,'' Chief Executive Officer Jamie Dimon said, adding that the process of combining operations with companies it acquired such as Bank One Corp. in 2004 is over. ``We now have the ability to execute,'' he said.

Dimon, 50, is turning his attention to growth after squeezing out more than $2.8 billion in annual costs since 2004 and making JPMorgan the best performer among the five largest U.S. bank stocks. The gains may help JPMorgan counter rising credit losses on corporate and consumer loans, and if the economy lapses into recession, Dimon said, ``we're prepared for that.''

Shares of JPMorgan rose 98 cents, or 2.1 percent, to $48.52 in composite trading on the New York Stock Exchange. They've gained 17 percent in the past 12 months, beating the 9 percent rise in the Philadelphia KBW Bank Index.

`Organic Growth'

Mortgage loans to low-rated ``subprime'' borrowers in the U.S. have reached a seven-year high, according to a March 2 report from Friedman Billings Ramsey Group Inc., and stocks of some loan companies have fallen by half this year. JPMorgan sold some loans and tightened underwriting standards.

``Our mortgage business is stronger today than it was several weeks ago,'' he said. Dimon called subprime lending losses manageable, and said the bank expects higher income from U.S. credit card fees.

The bank won't rely on acquisitions to boost earnings and instead will make ``organic growth'' a priority, Dimon said.

Past efforts to expand in commodities trading, in mortgage- backed securities and equities helped to lift revenue 25 percent at JPMorgan's investment bank to $18.3 billion last year. Net income at the division was almost unchanged at $3.76 billion, ``clearly not where we want to be in an environment as robust as this one,'' Black said. Net income across the company rose 70 percent to $14.4 billion.

Catching Goldman Sachs

JPMorgan overtook Goldman Sachs Group Inc. in 2006 to become the largest U.S. hedge-fund manager, according to a new survey. Its flagship fund gained almost 25 percent while Goldman's fell for the first time in seven years.

Hedge-fund assets at JPMorgan soared 74 percent to $34 billion last year, according to data compiled by Absolute Return magazine. That includes $20 billion at Highbridge Capital Management LLC, whose assets have almost tripled since JPMorgan acquired the firm in 2004. Goldman's hedge-fund assets rose 48 percent to $32.5 billion.

``We want to be the most aggressive risk-management firm in moving our business to absolute-return investing,'' said Jes Staley, chief of JPMorgan Asset Management.

JPMorgan is hunting for ``niche'' acquisitions for the investment bank in growing markets such as Russia and Brazil, Black said. Such purchases would be individual ``fill-ins,'' he said.

The company held discussions last year with Moscow-based securities firm Troika Dialog, people familiar with the talks said in August.

To contact the reporter on this story: Joseph N. DiStefano in New York at jdistef@bloomberg.net

Last Updated: March 6, 2007 19:24 EST