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The US banking industry's first major earnings report suggested the troubled sector is coming back to health, pushing up expectations for other big financial firms.
Goldman Sachs and Citigroup were set to report third-quarter results early Thursday on the heels of JPMorgan Chase, which said on Wednesday its quarterly profit jumped to 3.6 billion dollars.
Jon Ogg at 24/7 Wall Street said the report represented "very impressive earnings" from "the cleanest bank in America."
"The results are strong enough that it has set a very high bar for its peers," he said.
Goldman Sachs is expected to show a healthy profit for the July-September period, while Citi is projected to see further losses as it struggles to emerge from the credit crisis with a massive injection of capital from the government.
Analysts say that overall the sector is on the mend but with lingering troubles from the housing sector and consumer loans.
"We believe that the worst of the credit crisis is now probably behind us," said analysts at Zacks Investment Research in a note to clients.
"But the banking system is not yet out of the woods, as there are persistent problems that need to be addressed by the government before shifting the strategy to growth. We believe that the US economy will regain its growth momentum once these issues are resolved."
Zacks said the bigger banks "benefited greatly from the various programs launched by the government," but that many smaller lenders "are still in a very weak financial state."
JPMorgan Chase said its profit came largely from investment banking and trading results, which offset weakness in the consumer sector, especially in credit cards.
The results translated to 82 cents per share, much better than expected by analysts, who had called for a profit of 52 million dollars.
Revenues surged 81 percent to 26.6 billion dollars on a reported basis, due in part to the acquisition of failed lending giant Washington Mutual.
Jamie Dimon, JPMorgan Chase chairman and chief executive, said the results were positive but offered a cautious outlook.
"While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue," he said.
"Despite this near-term uncertainty about the path of the economy, our strong capital position and underlying earnings power will enable us to continue to invest in our businesses, creating a lasting franchise for many years to come."
More than half the profit, or 1.9 billion dollars, came from investment banking. The company lost 700 million dollars on credit card operations and 1.0 billion dollars in consumer loans.
It also set aside 3.8 billion dollars for credit losses, compared with 2.0 billion in the prior year, "reflecting continued weakness in the home equity and mortgage loan portfolios."
Commercial banking profits rose nine percent from a year ago to 341 million dollars, and asset management earnings increased 23 percent to 430 million.
Another big contributor to the bottom line was the corporate and private equity segment, including investment trading income. That amounted to a profit of 1.28 billion dollars, compared with a loss of 1.78 billion a year earlier.
The report was the first from the major US banks, which have been struggling with an unprecedented crisis stemming from a collapse of the housing bubble and a global credit squeeze.
JPMorgan has managed to navigate the global financial crisis and maintain profitability better than most of its peers, and has expanded to become the second-largest US bank by assets.
It acquired Wall Street giant Bear Stearns last year in a government-brokered deal to avert a collapse of the Wall Street firm.
It then scooped up Washington Mutual after the deepening of the financial crisis forced the giant thrift into bankruptcy, in a vast expansion for JPMorgan's retail banking.
In June, the New York firm repaid the government for its 25 billion dollar capital injection, which was part of a massive effort by authorities to shore up the financial sector as it suffered from the worst crisis in decades.
