JPMorgan's Irish unit makes $48m in asset swap deal

US investment bank JPMorgan Chase realised a once-off profit of $47.87 million (€35.15 million) at its Dublin office after the transfer of its corporate trust business to the Bank of New York in an asset swap deal.

The exceptional gain last year brought annual pretax profits to $73.76 million for 2006 in the main Irish unit of JPMorgan Chase, which carries out back-office work for mutual and hedge funds. The comparable figure in 2005 was $21.92 million.

The Irish corporate trust business was a small part of a global operation which was exchanged, together with a $150 million cash payment, for 338 Bank of New York branches in the New York area. The deal valued the trust business at a premium of $2.15 billion, while the Bank of New York assets were valued at a premium of $2.3 billion. About 70 Irish staff transferred to the Bank of New York following the transaction.

Newly filed accounts for JPMorgan Bank (Ireland), which manages the institution's Irish interests, show that its combined operating profit declined to $18.61 million in 2006, from $21.84 million.

The 2006 figure included a $4.39 million contribution from the trust business, which remained in the bank until September, and from a discontinued treasury and cash management outsourcing service which was wound down after March 2006.

The bank's withdrawal from this business coincides with an increase in hedge-fund management activities.

Carin Bryans, managing director of the Irish operation, said the bank expected to realise increased profits this year and in 2008, following increased investment in the hedge-fund business. "That's an area that should start to see returns this year and next," she said.

The bank did not make a dividend payment to its parent last year. A net profit of $59.94 million was transferred to its reserves. Closing shareholders' funds stood at $241.81 million at the end of 2006, up from $181.01 million a year earlier.

JPMorgan Bank (Ireland) employs 150 staff in hedge-fund administration at its office in Clare Hall, north Dublin. Ms Bryans said another 110 staff would be recruited by the end of 2008 if this part of the business grows in line with expectations.

The bank employs another 300 staff at the International Financial Services Centre, most of whom work in mutual fund administration.

Staff costs rose last year to $35.79 million from $26.91 million, the accounts say. The bank paid out corporation tax of $13.67 million in the same period, up from $1.99 million in 2005.

The Irish unit realised a gain of $7.15 million on the unwinding of a 2005 cross-currency swap, due to mature in 2021, to hedge a rental liability under a long-term lease.

The unit also booked a loss of $2.28 million on a derivative transaction which was closed out at the end of 2006. "This was a forward currency hedge put in place to insulate the group from currency fluctuations on non-USD [ dollar] subsidiary capital and reserve movements."