Nov. 9 (Bloomberg) -- JPMorgan Chase & Co., the third- largest U.S. bank, said it may write down more of its mortgage and debt holdings in the fourth quarter ``if market conditions worsen.''

JPMorgan held $40.6 billion in leveraged loans and unfunded commitments at the end of September that are difficult to hedge, the New York-based bank said today in a regulatory filing. The company's pipeline for fees from investment banking has also dropped from June 30 because of a decline in debt underwriting.

At least nine of the world's biggest banks and brokerages, including Citigroup Inc. and Merrill Lynch & Co., have written down a total of about $40 billion in bad loans and securities tied to mortgages this year after foreclosures set a record and late payments on U.S. home-loans rose to the highest since 2002. JPMorgan wrote down the value of loans for leveraged buyouts by $1.3 billion in the third quarter and marked down the value of collateralized debt obligations by $339 million.

During the fourth quarter, less liquidity and wider credit spreads may make it harder to sell loans to finance leveraged buyouts, lowering investment banking fees and trading revenue, JPMorgan said. Subprime mortgage holdings, trading positions and CDOs may also fall because of market conditions, the bank said.

Bad Loans

JPMorgan, which said Oct. 31 its mortgage originations climbed 35 percent in the third quarter, may have to set aside more money to cover bad loans. Home equity loans may cause a loss of $250 million to $270 million per quarter, ``over the next few quarters,'' the bank said.

JPMorgan fell 30 cents to $42.31 at 4:00 p.m. in New York Stock Exchange composite trading. The stock has dropped 12 percent this year, compared with a 20 percent decline in the 24- member KBW Bank Index.

``They weren't as involved in CDOs as Citigroup and Merrill Lynch,'' said Tanya Azarchs, a credit analyst for financial institutions at Standard & Poor's. ``Maybe that's one of the reasons they don't appear to have as many problems as the others.''

Bank of America Corp., the second-biggest U.S. bank, said today that turmoil in the credit markets would ``adversely impact'' fourth-quarter results. Wachovia Corp., the fourth- biggest bank, said mortgage-related losses and reserves for bad loans total $1.7 billion so far this quarter, more than the lender reported for the previous three months.

Wachovia gained 35 cents to $40.65 in New York Stock Exchange composite trading, after setting a 52-week-low of $38.05 earlier in the session. The shares have lost 29 percent this year.

Bank of America rose 48 cents, or 1.1 percent, to $43.98 in New York Stock Exchange composite trading. The stock has declined 18 percent this year.

To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net .