NEW YORK (Bloomberg) — JPMorgan Chase & Co., the second- biggest US bank, said the value of a $1.2 billion investment in Freddie Mac and Fannie Mae shares has declined by half so far this quarter.

The losses from the investment in perpetual preferred shares of the two US mortgage lenders may cut into quarterly earnings, the New York-based company said yesterday in a regulatory filing. Freddie and Fannie preferred stock is trading as low as 19 cents on the dollar on speculation the companies may suspend dividends to weather the biggest housing slump since the Great Depression.

"The precise amount of losses that may be incurred on these securities for the third quarter is difficult to determine, given the significant volatility being experienced in the market values of these securities," JPMorgan said in the filing with the US Securities and Exchange Commission.

JPMorgan declined 97 cents, or 2.6 percent, to $36.70 at 2 p.m. in New York Stock Exchange composite trading. The stock has declined 17 percent this year, compared with a 29 percent drop in the KBW Bank Index.

Banks including Sovereign Bancorp Inc. and M&T Bank Corp. may also have to write down the value of preferred-share holdings, KBW Inc. analyst Samuel Caldwell wrote in a report to clients yesterday.