JP Morgan sees huge 78 per cent rise in profits

The firm said profits jumped 78 per cent to 4.8 billion dollars (3.1bn) in the three months to June, helped by loan losses which have fallen by more than half to 2.2 billion dollars (1.4bn).

The profits also came despite a 550 million dollar (358m) hit from the UK bonus tax, the bank added.

JP Morgan's chief executive Jamie Dimon said he was "gratified" by the signs of improvement in the consumer lending business although he warned bad debts remained at "extremely high levels".

Retail banking profits recovered to one billion dollars (650 m) from just 15 million dollars (9.8m) the year before.

This contrasted with a 6 per cent fall in investment banking profits, where revenues were down 14 per cent year-on-year.

Mr Dimon said the bank continued "to aggressively do all that we can reasonably and responsibly to contribute to the economic recovery".

But with the looming prospect of tougher regulations to rein in banks and prevent a repeat of the financial crisis, he also warned against choking off a recovery.

He said: "Many challenges and uncertainties remain which may result in unintended consequences for our clients, the markets and our businesses.

"With a need for global regulatory co-ordination and hundreds of rules to be written, increased focus is critical in order to implement these reforms in a way that protects consumers and the competitiveness of the US financial system, while ensuring the flow of safe and sound credit."

JP Morgan has been one of the strongest performers since the financial crisis began, swallowing up ailing rival Bear Stearns as well as Washington Mutual in 2008.

But last month it was hit by a record 33.3m fine by the Financial Services Authority over its failure to ring-fence billions of pounds of client money.

The penalty was imposed after JP Morgan failed to segregate client cash from its own money during a period that spanned nearly seven years.