Enron and WorldCom litigation costs have helped drive JP Morgan’s profits south. It’s adding $2.3 billion. Then there’s Citigroup – with legal reserves topping $6.7 billion.

JP Morgan reported a second-quarter loss of $548 million, largely due to a hefty, $2.3 billion after-tax charge it is taking to add to its legal reserves for litigation revolving around its roles in the collapse of the Enron Corporation and WorldCom Inc..

The loss, which amounts to 27 cents per share, compares with profits of $1.83 billion, or 89 cents per share, in the second quarter last year.

J.P. Morgan also said it would eliminate about 12,000 jobs from the merged company, up from an earlier projection of 10,000 job cuts. Analysts said the cuts are likely to take place nationwide and will affect employees in the retail banking, credit card and corporate businesses.

The $2.3 billion charge brings J.P. Morgan’s total legal reserves to $4.7 billion. It represents an attempt by J.P. Morgan to assess its total exposure to possible settlement costs and court awards to investors who claim it helped perpetrate securities fraud at Enron and WorldCom, which are bankrupt.

“We have decided, after an extensive review, that our litigation reserves should be increased,” said William B. Harrison, Jr., J.P. Morgan’s chief executive officer, in a press release. “J.P. Morgan Chase will continue to defend itself vigorously in these legal matters, and will seek to resolve them in the manner management believes is in the best interests of the firm and its shareholders.”

J.P. Morgan already missed a deadline to settle with WorldCom investors and Mr. Harrison’s statement suggests that, unlike Citigroup, the bank plans to contest investors’ charges rather than settle. In May, Citigroup paid WorldCom investors $2.65 billion to settle their charges.

But Citigroup had a much more intimate financial relationship with WorldCom than J.P. Morgan, and Citigroup has outstanding exposure to other Wall Street lawsuits involving stock research and initial public offerings that J.P. Morgan does not have. This is reflected in the fact that, at $6.7 billion, Citigroup’s legal reserve is $2 billion greater than J.P. Morgan’s reserve.

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