Following on the heels of Goldman Sachs’ blowout second quarter results, J.P. Morgan Chase & Co. Thursday reported a standout performance of its own, although the impact of the uglier credit cycle is more evident in its results.

The U.S. banking giant reported second quarter net income of US$2.7 billion, up 36% from the same period last year. Earnings per share were down to 28¢, compared with 53¢ in the second quarter of 2008, however that reflects a 27¢ reduction due to its repayment of U.S. government bailout dollars (a one-time, non-cash reduction in net income). The firm also had record revenue of US$27.7 billion, pushing its first half revenue total to a record level too.

“We are pleased that, despite a continued difficult economic environment, we were able to report US$2.7 billion in earnings and record revenue of almost US$28 billion. Of particular note, the investment bank reported record overall revenue for the first half of the year, which included record fees and fixed income markets revenue for this quarter,” said Jamie Dimon, chairman and CEO.

Dimon noted that its other major businesses (commercial banking, asset management, treasury & securities services and retail banking) also had solid performance. “These results were negatively affected by the continued high levels of credit costs in consumer lending and card services, which we expect will remain elevated for the foreseeable future,” he added.

Commenting on the results, UBS Securities LLC notes that the positives in the quarter include record investment banking fees and fixed income trading revenue, the bank’s legacy assets produced a modest gain in the quarter, strong capital levels, good expense control, and US$10 billion in asset management inflows. The downside considerations include narrower net interest margins, and credit-related issues.

Isabel Schauerte, an analyst with Boston-based financial research and consulting firm, Celent, suggested that the results highlight the issues facing other banks — investment banking revenues may be strong, but credit issues are pressuring traditional banking business. “While all is quiet on J.P. Morgan’s investment banking and trading fronts, the bank’s traditional banking business has produced more dire results. This does not bode well for the results of some of J.P. Morgan’s universal banking peers,” she commented.

Looking toward the second half of 2009, Dimon said, “While we do not know if the economy will deteriorate further, we feel confident that, with our strong capital and reserve levels and significant earnings power, we can continue to reinvest in our businesses and do well for our clients, communities and shareholders over the long term.”

IE