Bigger-than-expected profit for bank giant

US investment banking giant JP Morgan Chase kicked off the third quarter bank reporting season today with a bigger-than-expected surge in profits.

JP Morgan - the largest US bank - posted a forecast-beating 3.6 billion US dollars (£2.3 billion) in net income for the three months to September, up from 527 million dollars (£330 million) a year earlier.

The group is the first of the US banks out of the stalls with quarterly figures, but it is expected to be followed by similar bumper earnings from rivals.

Barclays saw its shares leap 5% as investors saw the JP Morgan figures as a taste of what may be to come from the UK bank, which also has a thriving investment banking division.

US bank Goldman Sachs reports tomorrow and is seen beating all records for the year so far in an apparent return to business as usual less than a year after the sector went into meltdown, tipping the world into recession.

The figures from Goldman Sachs are expected to put the group's staff on track for a reported £14 billion in pay and bonuses this year and there are worries that excessive rewards are already back.

City minister Lord Myners began a series of meetings with the biggest banking payers today as the US groups with major London operations begin to report quarterly profits.

He is said to be urging restraint on pay and for banks to adhere to G20 principles, including so-called clawback clauses and requirements for bonuses to be spread out over a number of years.

JP Morgan declined to comment on its 2009 pay plans, which it said will be set only after the full-year results.

The group's third-quarter numbers were helped by its investment banking business, although it cautioned that loan losses were still high.

It almost doubled the amount of money it set aside for failed home and credit card loans in the quarter.

JPMorgan's loss provision to cover current and future home loan defaults jumped to 3.99 billion dollars (£2.49 billion), while its provision for credit card losses surged to 4.97 billion dollars (£3.11 billion).

The bank has emerged as one of the strongest in the sector during the financial turmoil, performing better than other big competitors, largely because of its relatively light exposure to troubled sub-prime mortgages and commercial real estate.

But traditional residential mortgages and home equity loans, as well as credit cards, continue to default, which is proving a headache for the group.

Jamie Dimon, chief executive of JP Morgan, said: "Credit costs remain high and are expected to stay elevated for the foreseeable future in the consumer lending and card services loan portfolios."

The bank also described the short-term path of the economy as uncertain.