JPMorgan Chase & Co. bears the burden of high expectations.

Market watchers hungry for a sign that the economy — and the banking industry — had turned a corner, were instead greeted Thursday with mixed results from the country's second-largest bank. The numbers underscored the many challenges facing banks in 2010.

"They are such a bellwether," said David Dietze, chief investment strategist for Point View Financial Services in Summit, N.J. "If they are seeing, generally, weaknesses that had not been foreseen, industry watchers must prepare for similar weaknesses by other large players."

Consumer loan losses are rising with the unemployment rate, JPMorgan Chase said in announcing fourth-quarter and yearend results. Credit cards continue to bleed money. Trading gains are falling as spreads narrow and the red-hot fixed-income market cools down. Credit costs remain elevated.

Many will have that checklist handy as they scrutinize Citigroup Inc.'s quarterly results due today, followed by Bank of America Corp.'s and Wells Fargo & Co.'s on Wednesday.

Investors obsessed over the negatives even as JPMorgan Chase's full-year profits more than doubled from a year earlier, to $11.7 billion, with net income of nearly $3.3 billion in the fourth quarter.

Still, those numbers — enviable by the standards of the other largest U.S. banks — were not good enough for many investors and analysts.

CEO Jamie Dimon was the first to say so. He said in a press release that his company's performance in 2009 "fell short" of its "earnings potential."

During conference calls with analysts and reporters, Dimon and JPMorgan Chase Chief Financial Officer Michael Cavanagh took pains to dismiss notions that the credit cycle had bottomed out.

"We don't know when the recovery is," Dimon said.

They also cautioned against reading too much into any positive developments in the last three months of the year. For instance, while JPMorgan Chase added $100 million less to its hefty credit reserves in the quarter — $1.9 billion compared with $2 billion in the previous quarter — Cavanagh said he "can't say" that reserves had peaked. Early-stage delinquencies improved from the prior quarter, but Cavanagh said "we know this might not continue."

Nonperforming loans fell slightly from the previous quarter, as did provisions for credit losses. The fact that JPMorgan Chase failed to highlight that first fact prompted one analyst to tell Cavanagh, "I'm surprised a little bit that you're not making more of a deal" out of it.

Dimon has a reputation as one of the country's most cautious bankers, but investors were still disappointed by his guarded tone.

JPMorgan Chase's shares fell more than 2% Friday. Bank of America was off more than 3%.

"It was a surprise to the Street that they weren't able to more definitely call a turn to the credit cycle," said Keith B. Davis, an analyst with Farr, Miller & Washington. "I think that is what people were hoping for — that they would say we've reached a peak with regards to these outsize additions to the loan-loss reserves."

There were other disappointments.

There was a sense that JPMorgan Chase's fourth-quarter earnings per share of 74 cents — well ahead of the consensus estimate of about 60 cents per share — may have been falsely inflated by a one-time tax benefit; its income tax was rated at about 15% in the quarter, compared with the typical 30% to 35%, as a result of a special tax audit.

"They beat the Street, but it was on a low tax rate," said Gary Townsend, the chief executive of Hill-Townsend Capital LLC. "So it's not been viewed as a very impressive beat."

He said JPMorgan Chase's revenue in the fourth quarter was also "underwhelming."

Net revenue fell about 12% from the prior quarter, largely because of lower client volumes and a narrowing of spreads in its fixed-income trading business.

Dietze said investors were also hoping for JPMorgan Chase to deliver good news about its dividend, which it slashed to a nickel, from 38 cents a share early last year. Dietze said he was hoping the company would have doubled the dividend in conjunction with earnings, which would have "laid down the gauntlet for the competition" to raise their quarterly payouts.

That didn't happen.

Dimon reiterated previous statements that JPMorgan Chase may raise the dividend in the latter half of 2010, depending on economic conditions.

"We really want to see a real recovery before we do that, because I don't want to have to do this again, just in case you have another dip down here," he said.

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