J.P. Morgan Chase & Co. today reported second-quarter net income of US$4.2 billion compared with US$3.5 billion for the second quarter of 2006. Earnings per share were up 21% year over year.

The increase in net income reflected strong revenue growth, primarily offset by an increase in noninterest expense, primarily driven by performance-based compensation, as well as an increase in the provision for credit losses.

Net revenue was US$5.8 billion, up by US$1.5 billion, or 34%, from the prior year, driven by record investment banking fees and strong markets results. Investment banking fees of US$1.9 billion were up 39% from the prior year, driven by record advisory fees, strong debt underwriting fees and record equity underwriting fees.

Debt underwriting fees were US$831 million, up 27%, driven by record loan syndication fees. Advisory fees of US$560 million were up 59%, benefiting from strong performance across all regions, it said. Equity underwriting fees reached US$509 million, up 40%, reflecting strong performance in Asia and Europe.

Fixed Income Markets revenue increased 15% from the prior year, to US$2.4 billion, driven by strong results across most products, partially offset by weaker commodities performance versus a strong prior-year quarter, the firm reported.

Equity Markets revenue of US$1.2 billion more than doubled from the prior year, benefiting from strong global derivatives and cash equities trading performance.

Credit Portfolio revenue of US$204 million was down 18% due largely to lower gains from loan sales and workouts.

Provision for credit losses was US$164 million compared with a benefit of US$62 million in the prior year. The increase in the allowance for credit losses reflects portfolio activity, the firm said.

Noninterest expense was US$3.9 billion, up by US$763 million, or 25%, from the prior year. This increase was due primarily to higher performance-based compensation expense.

Commenting on the quarter, Jamie Dimon, chairman and CEO, said, “We are pleased with our strong financial results driven by continued investment in all of our businesses and organic growth. Our strong earnings benefited from solid performance in the Investment Bank, record results in Asset Management and Treasury & Securities Services, and very strong results in Private Equity.”

“In addition, during the quarter we strengthened our reserve for the home equity lending portfolio. Although we remain at a relatively benign point of the credit cycle, we continue to focus on being prepared for a less favorable environment. Given the diversity of our business mix, improving operating margins across our businesses and the strength of our balance sheet, the firm is well-positioned for the future,” Dimon added.