J.P. Morgan Chase & Co. recorded much higher third-quarter net income, driven by record trading revenues, the bank said today.

The bank said quarterly profit was US$2.5 billion, compared with net income of US$1.4 billion for the third quarter of 2004. Current period results include US$221 million (pre-tax) of merger charges, reflecting the merger with Bank One Corporation completed on July 1, 2004. Excluding these charges, operating earnings were US$2.7 billion.

The investment bank division recorded operating earnings of US$1.1 billion, up US$436 million, or 70%, from the prior year and 75% from the prior quarter. The increases were driven primarily by record trading revenues of US$2.4 billion, up US$1.6 billion from the prior year and US$1.8 billion from the prior quarter. Trading results were strong across all trading areas, the bank said.

Investment banking fees were up 8% from the prior year. Europe was a strong contributor to these results, benefiting from the joint venture with Cazenove, it notes. Advisory fees were up 10% over the prior year. Debt underwriting fees were roughly flat to the prior year, and equity underwriting fees were up 24% over the prior year and more than doubled versus last quarter.

Fixed-income markets revenue saw a record quarter, more than double the prior year and up 71% from the prior quarter. The increase was driven by strong trading results in all areas, with particular strength in energy.

Equity markets revenue increased by 57% over the prior year, again driven primarily by improved trading results across regions and by higher commissions.

Operating earnings in the retail financial services division were down 20%, from the prior year. Results reflected a special provision for credit losses of US$250 million attributable to Hurricane Katrina. Excluding the impact of the special provision, operating earnings would have been down 1%.