Fitch Ratings has upgraded the rating for J.P. Morgan Chase & Co. The rating outlook is stable.

“Management’s multi-pronged focus on increasing market penetration, aggressive cross-selling, continued cost containment, and development of higher margined businesses is bearing fruit. Recent fiscal performance of the consolidated franchise showed good momentum with record revenues and net income reported,” Fitch explained.

The rating agency said that JPM holds leading market positions in a number of high margined institutional businesses including M&A advisory, syndicated loans, and credit derivatives. “Its consumer business has gained breadth and depth through both acquisitions and organic development. As a result, its retail operation ranks second in national deposit market share, second in home equity originations, and fourth in mortgage servicing,” it said. “Yet there remains an upside in the future profitability of this business as JPM is able to derive greater synergies from the various parts of its franchise.”

“The rating change considers that some of these businesses are subject to continued stress, such as parts of the mortgage business, yet concerns are mitigated by the diversification of JPM’s franchise within and across businesses. Credit metrics remain at a level that is likely unsustainably good. That said, the rating incorporates the expectation that JPM will remain well positioned to manage through a softening in the credit environment,” Fitch added.

“Prudent liquidity management remains a strength of the organization. Capital is efficiently managed. Return on common equity, while modest, increased significantly in 2006. Integration of the BankOne business will be completed this year, with total merger costs under budget,” it concluded.