Earnings at JPMorgan Chase and Wells Fargo dive

NEW YORK -- The earnings reports by two of the nation's largest banks came a day after the Treasury Department's announcement that it would purchase up to $250 billion in preferred shares in banks, including Wells Fargo and Chase, to shore up the ailing system.

This year, 15 banks have failed and 117 others have been put on the government's list of "troubled" institutions.

Chase CEO Jamie Dimon, on a conference call, said the Treasury's actions will help "weaker" institutions more than strong ones, but the proposal is the "right thing" for the industry.

Analysts consider Wells Fargo and Chase to be in better financial shape than many of their beleaguered peers. Wells Fargo didn't offer some of the exotic mortgages common during the boom, and Chase has smaller investment bank losses and more capital to cover bad loans than competitors do.

In the third quarter, JPMorgan's profit plunged 84%, partly because of bad mortgages and other consumer loans. The bank earned $527 million, or 11 cents a share, compared with $3.4 billion, or 97 cents a share, in the same period last year.

Meanwhile, Wells Fargo's third-quarter profit dipped 24% to $1.6 billion, or 49 cents a share, compared with $2.2 billion, or 64 cents a share, in the same period a year ago.

Both banks have seen charge-offs on consumer loans — such as mortgages, home equity and credit cards — rise precipitously; analysts expect these losses to balloon for at least the next few quarters.

"They reported significantly better results than the troubled institutions out there," says Jamie Peters, a senior analyst at Morningstar.

"But by no means are they immune," Peters says.