JP Morgan beats profit forecasts

INVESTMENT banking heavyweight JP Morgan Chase yesterday posted a higher-than-expected jump in second-quarter profit as it wrote off fewer bad mortgages and credit card loans.

The bank loaned more money during the quarter than in the first quarter and added staff, signs that bright spots are emerging in a sector long plagued by credit losses and an uncertain regulatory environment.

JP Morgan is the first major US bank to post quarterly results and its performance gives hints about how other banks performed in the period.

Richard Bove, a bank analyst with Rochdale Securities, said: "For this company to put up these kinds of numbers, given all the pressures the industry is facing, is phenomenal."

But the bank said it still faces big expenses in mortgages as the US housing crisis continues to saddle banks with high costs.

The group earned $5.4 billion (3.4bn) in the second quarter, up from $4.8bn a year ago.

JP Morgan's loan book grew to $689.7bn at the end of the quarter from $686bn on 31 March as increased business lending offset a 2 per cent decline in consumer lending. Compared with a year earlier, total loans were down 1 per cent.

Shrinking loan books and low interest rates since 2008 have made it difficult for banks to post profits, or increase them.

But many Wall Street banking analysts are hoping lenders will start to post loan growth in the coming quarters, which would be a sign of sustainable increases in profits.