JPMorgan Chase & Co. (JPM) posted lower third-quarter earnings on Wednesday, missing analysts' forecasts, on costs from its $58 billion purchase of Bank One Corp. (search) and lower bond trading revenue.

Investors were particularly disappointed in the trading shortfall, after several investment banks in September reported better-than-expected bond market results, despite a tough time for brokerages to make money.

"It was a very poor quarter, well below expectations and really almost entirely tied to fixed-income trading," said Tim Ghriskey, chief investment officer at Solaris Asset Management.

New York-based J.P. Morgan, the No. 2 U.S. bank, reported quarterly net income of $1.42 billion, or 39 cents a share, compared with $1.63 billion, or 78 cents per share, in the year-ago period.

Excluding $741 million in merger-related costs, J.P. Morgan posted operating earnings of $2.2 billion, or 60 cents per share. Wall Street analysts had expected the bank to earn 74 cents, according to Reuters Estimates.

Shares of J.P. Morgan fell 70 cents, or 1.84 percent, to $37.28 on the New York Stock Exchange (search) Wednesday.

"Expenses were a little bit high as well, and we would have liked to see more of the merger-related savings in this quarter," Ghriskey added.

The bank said it has already realized about $140 million in merger savings. It said it expects annual merger savings of about $3 billion.

J.P. Morgan reported merger costs of $462 million and an additional $279 million charge during the quarter related to aligning its accounting policies with Bank One's.

"The bottom line is while we had some terrible earnings results we feel very good about the merger's progress," J.P. Morgan Chief Operating Officer Jamie Dimon (search) told analysts on a call.

Dimon, set to become chief executive of J.P. Morgan in 2006, added that the bank remains "extremely cautious" about trading in the fourth quarter.

Volatile fixed-income markets this summer were a main drag on profits. Fixed-income market revenues fell 23 percent to $1.1 billion, helping to push investment bank earnings down 10 percent to $627 million.

The bank reorganized some of its investment banking management in the Americas in recent weeks and created one trading unit that combines all risk-taking activities -- partly in response to weaker-than-expected capital markets results in recent quarters.

Other areas of the investment bank fared better in the third quarter, with investment banking fees climbing 43 percent on continued strength in the company's debt underwriting.

J.P. Morgan bought Chicago-based rival Bank One for about $58 billion in July, creating the No. 2 U.S. bank and expanding the New York bank's retail branch network into the Midwest and deeper into the Southwest.

Revenues rose 64 percent to $13.6 billion due to the acquisition.

J.P. Morgan Chase shares have risen about 3 percent to $37.98 year-to-date as of Tuesday's close. In comparison, the Philadelphia KBW Bank Index (search) was flat during the same period.