JP Morgan said this afternoon profit rose to $1.63 billion in the third quarter as it set aside less money for bad loans and fees from investment banking rose.
It was the third straight quarterly rise in profit and compared with earnings of $40 million, or 1 cent per share, a year ago. Last year's third-quarter results were hampered by merger and restructuring charges and special items.
JP Morgan's performance suffered in 2002 as merger-related costs and losses in its large portfolio of private equity investments ate into profits.
"It looks like the turnaround is well under way here and the worst of its issues are behind the company," said Mr Bill Batcheller, a portfolio manager at National City Investment Management who owns shares in the bank.
He added some investors had expected higher trading-related revenue, which dropped significantly from the previous quarter.
The company's shares, which are up more than 50 per cent this year, fell $1.62, or 4 per cent, to $35.05 on the New York Stock Exchange. Mr Batcheller said profit-taking after a healthy run-up for the shares helped to explain the sell-off.
The New York-based bank said earnings were equal to 78 cents a share, which beat the average analyst profit estimate of 75 cents a share.