Has there been a change of heart at J.P. Morgan Chase & Co.?

Six months ago oddsmakers had the company selling off its retail operations to concentrate on investment banking and financial services for the affluent.

But more recently some very senior -and very high-profile - Morgan executives have been publicly contradicting that view.

Geoffrey T. Boisi, co-head of investment banking, said at the company's technology conference this month that retail banking is one of the next areas in which he expects Morgan Chase to expand. At a conference in New York last month, his counterpart in the investment bank, Donald H. Layton, said basically the same thing.

"This is it in wholesale," Mr. Layton said at the UBS Warburg investor conference, referring to last year's merger of Chase Manhattan Corp. and J.P. Morgan & Co. "But we might do things in retail where there is a strategic situation."

All of this has some analysts speculating. Most agree that Chase, as the retail bank is known, would be looking to expand its Internet capabilities. The company is also seen as an active participant in the market for mortgage and credit card portfolios.

The company's retail operations have been in something of a turnaround mode since the arrival last summer of David A. Coulter, the former chief executive of BankAmerica Corp. who joined pre-merger Chase from Beacon Group and took charge of the consumer business.

Mr. Coulter set out to cut costs and improve operating efficiency for the consumer group, announcing in January that it would have $90 million of restructuring charges this year as he pushes for double-digit profit growth. The moves are beginning to pay off, analysts said. For example, in credit cards - a business that has struggled in recent years with management changes and revenue growth - revenues rose 8% in the first quarter and were the largest driver of revenues and profits for the consumer business in the period.

"We think the retail business has the potential to add more value for J.P. Morgan Chase shareholders," Mr. Coulter said in a telephone interview Monday. "And I think that was really recognized in the first quarter in terms of our results. We are much more focused on our internal growth in retail. Of course, you don't rule things out, but at this stage [the agenda] doesn't involve a major acquisition."

Mr. Coulter has been reviewing Chase's various offerings, from credit cars and mortgages to investment products and online banking capabilities. Analysts said they are eagerly awaiting the results of that review, which are expected to be announced soon. Mr. Coulter said Monday that he had some items that were "definitely on the agenda."

The J.P. Morgan-Chase Manhattan alliance was forged to create a global investment bank that would rival Goldman Sachs Group and Merrill Lynch & Co. Consumer banking was almost an afterthought.

Now, analysts said, the state of the stock market may be stoking warmer feelings toward the consumer business. With revenues from investment banking and private equity activities declining, Morgan Chase's retail performance has been looking more reliable - and downright attractive. Some analysts have lowered their expectations for Morgan Chase this year based on the slowdown in capital markets. (See story, back page.)

"The new management is probably finding that the cheaper funding costs [from the retail bank] has its advantages," said Andrew Collins, an analyst at ABN Amro in New York. "I would expect them to extend in the online area."

Mr. Collins said Chase could pick up small online brokerages or banking companies, deals that would bolster what he sees as Chase's Achilles' heel in retail - online technology. "They need to get up the curve in terms of retail technology," he said. Smaller, privately held firms could be attractive, he said. Such deals could even be done through Morgan Chase's private equity arm, J.P. Morgan Partners.

Other analysts said Chase could be in the market for a branch network. "If you're going to buy, now would be the time," said Diana Yates of A.G. Edwards & Sons in St. Louis. Since the pairing of Wachovia Corp. and First Union Corp., she said, "you're going to have more desperate mergers as the smaller regionals start looking around. Whoever is sitting in a more powerful seat is going to be able to take advantage of that."

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