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JPMorgan Chase

JPM -1.49%

& Co. said second-quarter profit surged and customer spending is returning to pre-pandemic levels, evidence of a strong economic recovery that shows few signs of slowing.

The nation’s biggest bank posted a profit of $11.95 billion, or $3.78 per share, compared with $4.69 billion or $1.38 per share a year ago. That beat the expectations of analysts, who had predicted $3.20 per share.

Yet revenue fell 8% to $30.48 billion from $33.08 billion a year ago, the result of depressed lending margins and lower trading revenue. Analysts had expected $29.97 billion in revenue, according to FactSet.

The divergence between profit and revenue is largely due to the extraordinary conditions of the second quarter of 2020, when the coronavirus pandemic appeared poised to decimate the economy. Then, JPMorgan set aside $10.47 billion to prepare for a wave of loan defaults. This quarter, the bank continued to free up pandemic loan-loss reserves, releasing another $3 billion and boosting its bottom line.

Most of the freed-up funds came from the pot of money set aside to cover consumer-loan defaults. JPMorgan said its customers are spending more on restaurants and travel, and they have got the cash to do so without taking on more credit-card debt. But they are borrowing for big-ticket items: Auto loan and mortgage originations were both up sharply. Consumer deposits rose 19%.

“Their house value is up. Their stock value is up. Their incomes are up. Their savings are up. Their confidence is up. The pandemic is kind of in the rearview mirror, hopefully,” Chief Executive

Jamie Dimon

said on a call with analysts Tuesday. “They are raring to go.”

JPMorgan Chase opened bank earnings season Tuesday. Its shares are up more than 20% this year.



Photo:

Amir Hamja for The Wall Street Journal

JPMorgan shares fell 1.5% Tuesday to $155.65. They are up about 22% this year and hit an all-time high in June. Investors have piled into bank stocks to get exposure to the economic recovery.

Still, the second quarter was a mixed bag for JPMorgan. Last year’s market chaos, which can be ideal for trading, has quieted now that the U.S. has gotten the pandemic under control. Corporate clients that last year nervously rushed to raise money are now flush with cash.

In JPMorgan’s corporate and investment bank, trading revenue was $6.79 billion, down 30% from a blockbuster quarter a year ago but better than executives had forecast. Investment banking fees rose 25%. Stock underwriting revenue rose 9%, and debt underwriting rose 26%. Fees from advising on mergers and acquisitions rose 52%.

JPMorgan’s commercial bank posted a $1.42 billion profit, swinging from a loss a year ago. The asset and wealth management unit’s profit rose 74% to $1.15 billion.

And while spending on JPMorgan consumer credit cards increased 51% in the quarter, borrowers are still paying down card debt quickly. The bank said that means lower lending profits going forward. Net interest income, the amount the bank collects in loan interest minus what it pays for deposits, fell 8% in the second quarter.

Investors and analysts are searching for signs of a revival in loan growth, which they believe signals the next stage of the economic recovery. Overall, JPMorgan’s loan balances grew 3% in the second quarter.

How Banks Are Performing

Recent WSJ stories on banks and markets, selected by editors

Write to David Benoit at david.benoit@wsj.com

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