NEW YORK (CNN/Money) - Citigroup and J.P. Morgan Chase posted higher second-quarter profits Wednesday as low interest rates lured consumers to borrow money from the top financial services firms.

But the slowdown in investment banking and trading affected both companies, whose fortunes are partially tied to the stock market's. J.P. Morgan's results fell well short of Wall Street expectations, sending its shares tumbling.

Citigroup, the No. 1 financial services company, earned $4.08 billion, or 78 cents a share, in the quarter, excluding special items. That was up from the $3.79 billion, or 74 cents a share, it earned before special items in the year-earlier period. Analysts surveyed by earnings tracker First Call had a consensus earnings-per-share forecast of 77 cents.

The company's results included a $167 million writedown of WorldCom Inc. bonds held by its insurance portfolio, which reduced earnings per share by 3 cents.

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Citigroup's consumer business, which includes banking and credit cards, saw earnings increase 25 percent to $2 billion, while its corporate and investment banking income was little changed at $1.4 billion. Investment management saw income rise 23 percent to $505 million, while the company's property and casualty insurance business saw a 25 percent drop in profit to $256 million.

The Federal Reserve cut interest rates 11 times last year to encourage consumers and businesses to borrow money.

Judah Kraushaar, who covers Citigroup for Merrill Lynch, called the company's quarter reassuring. He has a "strong buy" rating on the stock and a $60 price target.

In a note to clients, he was less upbeat about J.P. Morgan, which earned $1.18 billion, or 58 cents a share, excluding special items and including merger charges. That's well below the 65-cent-per-share forecast of analysts surveyed by earnings tracker First Call.

"There was little in the 2Q results that showed JPM is differentiating itself vis a vis other major financial firms," Kraushaar wrote.

Still, Morgan's results are an improvement from the $786 million, or 33 cents a share, it earned in the year-earlier period.

The company felt the slowdown in stock underwriting and advising on mergers and acquisitions

Profits at Morgan's investment banking operations fell 35 percent from a year ago, to $485 million. Trading revenue and brokerage commissions fell 23 percent, to $1.41 billion.

But operating profits at the firm's retail and middle markets group were a record $686 million in the quarter, up 60 percent from a year ago on strong consumer-lending operations and gains in providing services to mid-sized companies.

Citigroup followed a similar pattern. Income at its consumer unit, including credit cards and home equity loans, rose 25 percent to $2.01 billion. Profits at Citigroup's corporate and investment bank rose 4 percent, to $1.45 billion. Capital markets and banking income rose 4 percent, to $1.07 billion.

And losses in WorldCom shares hurt Citigroup's proprietary investments, which lost $190 million.

Morgan's revenue rose 9 percent in the second quarter, to $7.91 billion.

Revenue at Citigroup gained 10 percent to $22.35 billion from $20.32 billion a year earlier. That came in just short of the First Call revenue forecast of $22.5 billion.

"Overall the capital markets were not strong for the company [J. P. Morgan]," Andrew Collins, who covers banks for U.S. Bancorp Piper Jaffray, told CNNfn's The Money Gang

As for Citigroup, Collins said its diversity helped it weather the quarter. The worldwide company does investment, commercial and retail banking along with providing insurance and brokerage services.

Citigroup also announced that its board has approved the buyback of an additional $5 billion in Citigroup stock, bringing the amount available for repurchases up to $7.5 billion. The company bought back $1.6 billion in shares during the second quarter.

Shares of Citigroup (C: up $1.00 to $37.20, Research, Estimates), a Dow Jones industrial average component, were up almost 3 percent Wednesday afternoon. But fellow Dow member J.P. Morgan (JPM: down $0.56 to $27.94, Research, Estimates) slipped almost 2 percent.

The results come a day after Merrill Lynch & Co. posted an unexpected gain in second-quarter profits while Charles Schwab, the No. 1 discount brokerage firm, reported a slight dip in second-quarter earnings Tuesday.  

-- from staff and wire reports