JPMorgan Chase & Co quarterly profit rocketed to a much-higher-than-expected $3.6 billion as bond trading revenue surged, boosting optimism about a rebound in top Wall Street banks.

The results cement JPMorgan's position as one of the few banks that has emerged stronger from the financial crisis. The bank's shares rose as much as 4 percent to a one-year high in morning trading, leading the Dow Jones industrial average <.DJI> higher.

Investment banking profits were the lion's share of the 580 percent increase in JPMorgan earnings, boding well for other large banks due to report this week, including Goldman Sachs Group Inc and Citigroup Inc .

In this environment, this is a championship performance, said Mike Holland, president of Holland & Co in New York.

Profits were boosted by earnings from investment bank Bear Stearns Cos and Seattle-based thrift Washington Mutual Inc, two ailing businesses JPMorgan was able to snap up last year in the depths of the financial crisis.

But the results were not uniformly positive. The bank lost money in its credit card business, and Chief Executive Jamie Dimon warned on a conference call that it is still too early to conclude the tide has turned on rising loan losses. Dimon's caution and respect for risk has made him one of the most revered bank CEOs among investors and the Washington power elite.

One of the biggest contributors to JPMorgan's profits was bond trading, where rising asset values have helped Wall Street firms all year. Stock and bond underwriting revenue also jumped, reflecting the bank's No. 1 position in the investment bank league tables.

JPMorgan's investment bank reported net income of $1.9 billion, up from $882 million a year earlier. The increase came in part from gains of $400 million on leveraged loans and mortgage-related securities that had a $3.6 billion writedown in the year-earlier quarter.

Trading gains lifted fixed income markets revenue to an eye-popping $5 billion, up from a little more than $800 million a year earlier.

JPMorgan as a whole posted third-quarter net income of 82 cents a share, compared with 9 cents in the same quarter last year.

Analysts on average had forecast earnings of 52 cents a share, according to Thomson Reuters I/B/E/S.

Chief Financial Officer Mike Cavanagh said the bank could boost its annual per-share dividend to around 75 cents or $1 early next year if we're lucky. The bank cut the annual dividend to 20 cents a share from $1.52 in February.


But JPMorgan also has sizable consumer lending businesses, including some particularly troubled credit card portfolios it inherited from Washington Mutual, where trends are a little harder to discern. The bank posted $700 million of losses in its credit card business in the third quarter, compared with a $292 million profit a year ago.

There were some bright spots in the credit card business: Credit card loans owned by the bank and investors and deemed uncollectable rose by just 1 percent, a big deceleration from a 25 percent increase in the second quarter.

Cavanagh said the bank sees losses slowing for some of its mortgage and consumer loans. If this trend continues, the bank may soon be able to stop adding to credit reserves, but it is not yet clear if the trend will last, he added.

Cavanagh has been mooted as a contender to succeed Dimon, but in response to a question he said he does not think about that.

JPMorgan last month shuffled top management, naming Jes Staley as chief executive of the investment bank and raising questions about who was best positioned to succeed Dimon.

Dimon, 53, is not expected to leave any time soon. He told analysts the management changes were part of his efforts to protect the longer-term health of the company.

In another bid to look after the bank longer term, Dimon -- who received about $19.7 million in compensation in 2008 -- said he is committed to paying staff appropriately and believes the bank's pay guidelines are broadly in line with those coming from regulators globally.

JPMorgan has set aside $8.79 billion for compensation in its investment bank unit so far this year. That amounts to $353,834 per employee. For the first three quarters of 2008, JPMorgan set aside $210,854 per employee. Median household income in the United States for 2008 was about $50,300.

Industries have to pay for performance, Dimon said.

JPMorgan shares have outperformed peers such as Citigroup and Bank of America this year and in 2008. JPMorgan shares fell 30 percent in 2008, compared with a nearly 50 percent drop in the KBW Banks Index <.BKX> and an 80 percent decline for some of its competitors.

JPMorgan posted third-quarter earnings of $302 million in its treasury and securities services unit, down 26 percent from the same quarter last year. That may bode poorly for earnings from companies in similar businesses, such as Northern Trust Corp and State Street Corp .

(Reporting by Elinor Comlay, additional reporting by Steve Eder and Dan Wilchins; editing by John Wallace)