Shares in JP Morgan Chase have surged, as speculation mounted that the financial powerhouse could be taken over by a smaller competitor.

Wall Street has been abuzz with rumours that JP Morgan, founded in 1861 and still one of the best-known names in global finance, could fall prey to Chicago-based Bank One.

The talk sparked a 6% jump in the shares of JP Morgan, which has hit hard times in recent months after revelations of its involvement with failed energy trader Enron.

But while Bank One now has a larger market capitalisation than the Wall Street firm, analysts said a deal was unlikely to come off.

Cheap deals

Bank One has expressed an interest in expanding credit card, money management, retail and possibly investment banking units, and analysts say current low stock market values make takeovers an attractive proposition.

JP Morgan boasts 150 years of history

But concerns over the possible scale of JP Morgan's exposure to corporate loans could prevent a deal.

The bank is one of the world's biggest lenders to top companies, and has therefore been hit especially hard by the spate of grim results and corporate collapses in recent months.

"Whoever buys JP Morgan is going to have to have a lot of capital... to address the balance sheet issues that clearly hang over the stock," said Reilly Tierney of Fox-Pitt Kelton.

Ups and downs

A week ago, JP Morgan, still the second-biggest US finance house, unveiled a 90% drop in quarterly profits and it said it would cut about 2,200 additional jobs.

"Whenever a company is as challenged as JP Morgan is right now with respect to its financial performance, that's when stories like this surface," said Brock Vandervliet, an analyst at Lehman Brothers.

Bank One, meanwhile, which has focused on the credit card business, has fared better.

It recently posted a 9% rise in third-quarter profits to $823m, more than 20 times as much as JP Morgan made in the same period.