America's scandal-racked JP Morgan Chase smashed Wall Street's forecasts yesterday with the help of a revival in so-called simple banking.
The bank, the world's biggest by assets, has been reeling in the wake of a trading scandal in which Bruno Iksil, nicknamed the London Whale, lost $5.8bn (£3.6bn) through derivatives trades.
Yesterday, however, a boom in simple mortgage lending helped the bank to roar back and post a $1.4bn rise in third-quarter post-tax profits, which came in at $5.7bn.
The bank's earnings per share of $1.40 were well ahead of analysts' forecasts of $1.21, and the 34 per cent rise in profits came in a traditionally quiet quarter for earnings.
Jamie Dimon, the chief executive, who has been battling to repair the bank's reputation after the trading losses, said: "The firm reported strong performance across all our businesses in the third quarter. I am proud of the momentum we are seeing throughout our businesses."
Mortgage loan originations surged by 29 per cent to $47.3bn. A large part of that was down to efforts by the US government to stimulate the country's moribund housing market.
The Federal Reserve, the US central bank, has been operating a bond-buying programme which has tempted homeowners to either refinance existing mortgages or buy new loans. It plans to purchase $40bn of mortgage-backed securities from investors every month until the economy picks up.
"Importantly, we believe the housing market has turned the corner," Mr Dimon said. "In our mortgage banking business, we were encouraged that credit trends continued to modestly improve."
Retail financial services provided net income of $1.4bn for JP, up from $1.2bn as the mortgage sales boom offset a squeeze in net interest margin – the difference between what banks pay depositers and charge lenders.
Consumer and business banking average deposits were up 9 per cent and business banking loan balances grew for the eighth consecutive quarter to a record $19bn, up 8 per cent. Credit card volumes grew 11 per cent.