(Reuters) - JPMorgan Chase & Coposted a 31 percent increase in second-quarter earnings on Friday after underwriting income jumped and bond market trading revenue rose.
U.S. fixed-income markets plunged during the quarter, lifting longer-term home loan rates and cutting into mortgage lending revenue. The bank said difficult market conditions might force it to accelerate cost cutting moves.
But the results beat analysts' expectations, and the largest U.S. bank said it managed to make more profit from corporate bonds and related derivatives even amid the market turmoil. Its shares rose nearly 1 percent in premarket trading.
The year-ago quarter was hurt by the "London Whale" trades, bad bets on the credit market that ultimately cost the bank more than $6 billion. In that period, the unit that held the trades booked $1.76 billion of losses. Those trades have since been switched over to JPMorgan's investment bank.
Overall, net income rose to $6.50 billion, or $1.60 per share, in the latest quarter from $4.96 billion, or $1.21 per share, a year earlier. (Graphic: http://link.reuters.com/tec69t)
Analysts on average had expected earnings of $1.44 per share, according to Thomson Reuters I/B/E/S.
About 24 cents per share of the gains came from dipping into funds previously set aside to cover loan losses.
The bank said revenue from fixed income and equities rose 18 percent.
Mortgage banking income, which comes from making home loans and servicing existing mortgages, fell 14 percent to $1.1 billion as a refinancing wave subsided and interest rates rose.
JPMorgan is the second-largest U.S. mortgage lender after Wells Fargo & Co , with an 11 percent market share. Wells Fargo also reported a higher quarterly profit on Friday.
JPMorgan shares, which rose 0.6 percent to $55.48 before the bell, were up 25 percent this year at Thursday's close, helped by growing confidence that the U.S. economy is on the road to a solid recovery.
However, the stock has been volatile in recent weeks because of concern that higher bond yields would erode the value of bank assets before they generate new revenue from lending.
The results are the first the bank has released since Chairman and Chief Executive Jamie Dimon overwhelmingly won a shareholder referendum in May on whether he should hold both posts.
(Additional reporting by Tanya Agrawal in Bangalore, Editing by Dan Wilchins, Ted Kerr and Lisa Von Ahn)