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JPMorgan Chase earns $4.8 billion

By David Ellis, staff writer

NEW YORK (CNNMoney.com) -- JPMorgan Chase said it earned $4.8 billion during the second quarter on Thursday, as business tied to banking with American consumers more than offset a slowdown on Wall Street.

The first of the nation's big banks to report results, the company said it earned $1.09 a share, excluding the impact of a benefit tied to a reduction in loan loss reserves. Including that, the bank reported a profit of 73 cents a share.

JPMorgan shares have continued to march higher over the last year, helped by the firm's ability to churn out consistently higher profits.

Analysts were expecting the New York City-based bank to earn $2.8 billion during the quarter, or 67 cents a share, according to Thomson Reuters.

One of the most encouraging signs for JPMorgan was an improvement in consumer payment habits, particularly on credit cards and their mortgages.

But CEO Jamie Dimon cautioned it was not certain whether conditions would continue to get better, noting that losses in areas like home equity loans continued to remain near historic highs.

"It is too early to say how much improvement we will see from here," said Dimon.

The improvement in credit was mitigated somewhat by weak loan demand, particularly within its business lending division. It did however allow the bank a rare opportunity to draw down some of the massive amounts of reserves it has stockpiled since the crisis began to cope with loan losses.

In total, the company said it released $1.5 billion from its reserves, providing a lift to earnings.

"You should assume we don't like to release loan loss reserves," Dimon said during a conference call with analysts.

That increase was partially offset though by a $550 million charge it took as a result of a tax levied on bankers earlier this year by the British government. The tax is expected to impact the U.K.-based operations of a number of big U.S. banks this quarter.

Still, many of the bank's various business delivered strong performances. Both JPMorgan's credit card and retail banking business each reported higher profits compared to last quarter and a year ago. And even with the recent market sell-off, earnings at the firm's asset management business was up from 2009 as well.

One unit that did struggle was its investment banking division, as net income fell 6% to $1.4 billion from a year ago, hurt by lower stock and debt underwriting activity, a decline that Dimon partly attributed to banks fighting for deals again.

"The competition is back," he said.

Trading revenues were also lower as a result of the recent shake-up in financial markets. That weighed on JPMorgan's results.

Earlier this year, JPMorgan Chase, Goldman Sachs (GS, Fortune 500), Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500) booked surprisingly strong profits as their trading desks reported profits on every single business day of the first quarter.

The latest numbers however do speak to the company's improving fortunes. Just a year ago, JPMorgan earned $2.7 billion.

The better-than-expected profit may also offer some hope for consumer-focused banks. Citigroup and Bank of America are both slated to report their latest results before Friday's opening bell.

JPMorgan's results also come just as the Senate prepares for its final vote on financial regulatory reform.

In a statement, Dimon praised parts of the bill, including provisions aimed at eliminating the notion of some banks being "too big to fail" that give regulators the powers to shut down large, complex financial firms. But he warned the new rules could have "unintended consequences" for its clients and various businesses.

Dimon was reluctant to provide any estimates about just how much the new rules would impact profits at the company.

"You are talking about several years before it phases in," he told analysts. "We don't really know."

Revenues within the company's credit card business have already started to come under pressure as a result of new rules on credit card practices mandated by Congress earlier this year. The Federal Reserve also recently prohibited banks from automatically enrolling customers in overdraft protection programs. Now consumers get to opt in.

JPMorgan (JPM, Fortune 500) shares finished narrowly higher Thursday. To top of page

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