Shares of global financial services company JPMorgan Chase (JPM - Free JPMorgan Stock Report) fell in morning trading, despite the fact that the Dow-30 component reported September-quarter earnings that weren't quite as bad as investors had very recently anticipated following earlier estimate reductions.

The company earned $1.02 a share, roughly flat with results of $1.01 in the year-earlier period, but well below the $1.27 that it earned in the June interim. The $1.02 tally also fell short of the $1.20 that we had looked for at the time of our August review.

But September-interim results came in on the high end of Wall Street's recent downward estimate revisions to the $0.90-$1.00-a-share range, following company remarks a few weeks ago that it expected trading income in the September period to decline 30% from the June-period tally and investment banking fees to fall to $1.0 billion, from $1.9 billion in the June interim.

Results included three significant items that added a net $0.05 a share to the bottom line: a $0.29 gain related to an accounting adjustment due to a widening in credit spreads in the investment banking division; a loss of $0.09 in the private-equity business; and additional litigation expenses, mostly for mortgage matters, which reduced results by $0.15 a share. Stock repurchases also added a few pennies to share net.

JPMorgan's retail financial services business was its only division to post better profits than in the June quarter, aided by increased mortgage revenue. Excluding the accounting gain, investment banking revenues declined substantially, hurt by challenging market conditions in the quarter. The loss in the corporate/private equity division was attributable to writedowns on private investments and the aforementioned litigation expenses.

The company's other divisions turned in mixed performances. Credit card profits moderated, but card loan losses fell to a more normal level. Commercial banking results were lackluster, but loan balances rose 9% year to year (loans to midsized firms rose 18%). Lower institutional revenues held back asset management profits.

Looking ahead to the December quarter, the company expects investment banking profits similar to its September-period performance. Consumer banking results will likely be weighed down by new restrictions on debit card fees, which are expected to reduce revenues by $300 million a quarter (roughly $600 million total in 2012, assuming the company can offset half of the effect, as it expects to do), continued high mortgage foreclosure costs, and spread compression in the current low interest-rate climate. Low interest rates will probably continue to pressure margins in the commercial banking and treasury & securities services businesses, as well. Declines in asset values may pressure asset management revenues. Private-equity results are market sensitive, and probably will remain lumpy. Credit card loan losses might fall a bit more in the final period of 2011, but should stabilize in 2012.

Given the difficult operating environment, we've lowered our 2011 share-net estimate to $4.50, from $4.90. Also, assuming the operating climate remains tough in the first half of the new year, we now tentatively look for earnings of $4.60 a share in 2012, down from our previous estimate of $5.20. Once market conditions improve and economic activity strengthens, however, we look for earnings growth to resume at a healthy pace. Indeed, JPMorgan Chase shares may be a rewarding investment over the pull to 2014-2016.

Note that concerns have recently arisen regarding large banks' exposure to five troubled European nations. JPMorgan has $15.1 billion in companywide exposure to these countries, net of $5.2 billion of hedges, with 85% to Italy and Spain. The exposure breaks down to $3.7 billion of available-for-sale securities, 90% government guaranteed; $8.7 billion of trading exposure, 65% to sovereigns; and $7.9 billion of loans, 75% to corporations. The company continues to do business in these nations, and previously estimated its ultimate losses at no more than $3.0 billion. Conservative investors should note that this situation adds a little uncertainty to our estimates and projections.

About The Company: JPMorgan Chase & Co. is a global financial services company offering a variety of services with operations in over 60 nations. At the end of 2010, JPMorgan held $2.1 trillion in assets and operations. Operational divisions include investment banking, treasury & securities services, asset management, commercial banking, retail financial services, card services, and private equity investment. The company had previously merged with Washington Mutual in September, 2008, Bank One in July, 2004, and Chase Manhattan in the final month of 2000.