Buoyant JP Morgan cheers Wall Street

JP Morgan Chase, the US banking giant, cheered up Wall Street with news from its latest quarterly results: trading has not been as bad as everyone feared.

Banking sector analysts had begun to worry that Wall Street reforms would permanently crimp trading activity at the biggest institutions, but its JP Morgan investment bank enjoyed a 46 per cent surge in profits.

While that was largely made up of improved underwriting fees for clients that issued debt and equity, the bank also posted increases of 20 per cent and 18 per cent in fixed income and equity trading, respectively.

Jamie Dimon, the chief executive, has been a vocal critic of the extent of Wall Street reform, but yesterday he played down the effect of regulatory changes, including higher capital requirements and more rules on derivatives trading. "JP Morgan will be fine," he said. "Things will adjust over time."

He added that there would be no major redundancies at the investment bank, separating JP Morgan from its rivals, who have been laying off staff over recent months.

JPMorgan Chase shares were up more than 2 per cent in a flat market by lunchtime, as analysts cheered the investment banking results and some improvements in the retail bank, too. The company was able to unlock $1bn that it had set aside for bad credit card loans, but Mr Dimon conceded it still has some work to do to resolve problems with its mortgage lending.

The company put aside a further $1.3bn (£807m) to pay for mortgage-related litigation. US banks are negotiating an industrywide settlement over claims the foreclosure process has been riddled with paperwork errors and negligent behaviour by staff. Overall, it recorded a $5.43bn profit for the three months to the end of June, up 13 per cent.

Mr Dimon also weighed in on political negotiations to raise the legal ceiling for US federal government debt. Not to do so, he said, invited "catastrophe".