JPMorgan Chase, the third largest US bank, has reported a 50% drop in quarterly profits, as it was hurt by writedowns for loans and mortgages. The bank also set aside more money for loan losses.

First-quarter profit fell to $2.37 billion, or 68 cents per share, from $4.79 billion a year earlier. Net revenue fell 11% to $16.9 billion. Analysts had expected profit of 71 cents per share.

JPMorgan agreed last month to buy Bear Stearns, the Wall Street investment bank. The bank set aside $5.11 billion for credit losses, more than triple the figure for a year earlier.

JPMorgan also said it added $2.5 billion to its credit reserves, including $1.1 billion related to mortgage loans.

Its investment bank wrote down about $2.6 billion, including $1.2 billion for mortgages, $1.1 billion for loans to fund corporate buy-outs, and $266 million tied mainly to collateralised debt obligations, or investment products linked to risky loans. Results also included a $955 million after-tax gain tied to Visa's flotation last month.

Chief executive Jamie Dimon offered a bleak outlook despite what he called the bank's 'solid business momentum' and 'strong' capital position.

'Our expectation is for the economic environment to continue to be weak and for the capital markets to remain under stress,' he said. Mr Dimon added that these factors were likely to continue to affects the bank's credit losses and earnings for the rest of the year or longer.