JP MORGAN Chase posted a smaller-than-expected drop in earnings on resilient stock and bond underwriting revenue yesterday, lifting its shares by 11 per cent.
However, the bank cautioned that the mortgage market and the economy were getting worse.
The bank's second-quarter profit fell more than 50 per cent to $2 billion (€1.26 billion), hurt by $1.1 billion in writedowns at its investment bank and charges linked to the bank's acquisition of Bear Stearns.
But even amid writedowns, the third-largest US bank generated stronger-than-expected results, helped by underwriting and bond trading.
The results triggered a broad rally in financial stocks a day after Wells Fargo reported surprisingly strong results that also lifted bank stocks.
JP Morgan chief executive Jamie Dimon has managed to sidestep the worst of the credit crisis that has forced massive write-downs at Wall Street firms.
The bank has been benefiting from rivals' weakness and is gaining market share in multiple businesses because of it, JP Morgan chief financial officer Michael Cavanagh said yesterday.
The bank is still open to buying a regional bank while the sector is depressed, Mr Dimon said, adding that although accounting rules related to taking on a weak bank's balance sheet made a purchase more difficult, it was still possible.
Mr Dimon sounded some ominous notes in a conference call, however, saying the bank was prepared for losses on prime mortgages to triple and adding that, unlike Wells Fargo, the bank had no plans to boost its dividend.
"We're not going to increase the dividend until we see clear daylight," he said.
But Mr Cavanagh said the pace of deterioration in home equity - a major drag for many banks - was slowing. Other businesses were also looking up: investment banking fees of $1.7 billion were the second-highest on record at the bank.
JP Morgan Chase posted net income of 54 cents a share, compared with $4.23 billion, or $1.20 a share, in the same quarter last year. Analysts, on average, had expected earnings of 44 cents a share, according to Reuters Estimates.
JP Morgan paid out 57 per cent of its investment banking revenue as compensation, which is a relatively high level. Banks typically aim for a compensation ratio closer to 50 per cent.
