US investment banking giant JP Morgan Chase reported a 23pc leap in third quarter profits today as the sector continues to make a marked recovery from the financial crisis.
The group said a sharp fall in bad debts offset a 33pc plunge in investment banking income during the three months to the end of September.
JP Morgan reported better-than-expected net income of $4.4bn (€3.16bn) in a strong start to the third quarter results season.
The profits hike saw the bank set aside another $6.7bn (€4.8bn) in pay and bonuses for its 237,000 staff worldwide - of which $2bn (€1.4bn) was put by for investment banking workers alone.
JP Morgan said the compensation ratio for the investment bank was 38pc, marginally higher than the 37pc seen in the second quarter, when the impact of the $550m (€395m) UK bonus tax hit was stripped out.
The increase in the division's salary and bonus bill comes despite lower investment banking returns, which saw overall profits slip 7pc compared with the second quarter.
Profits from the division - a large driver of growth in recent quarters - slumped to $1.3bn (€933m) due to lower fees from underwriting stock offerings.
This was overshadowed by news that losses on bad debts plummeted 67pc year-on-year.
Jamie Dimon, chairman and chief executive of JP Morgan, warned loan losses were still high in both the mortgage and credit card portfolios, but added they were stabilising after the recession.
The results came in well ahead of analyst forecasts and suggest another resilient quarter for bank earnings, with major US players including Goldman Sachs and Morgan Stanley reporting next week.
But the news did little for bank shares in London today as Standard Chartered's move to tap investors for £3.3bn raised questions over whether rivals would follow suit ahead of new capital rules.
Mr Dimon said JP Morgan's "fortress" balance sheet positioned it well for the incoming Basel III regulations.
The bank - America's second-largest by assets and the first big bank to report quarterly results - was one of raft to post mammoth trading profits last year as financial markets recovered from the credit crisis, allowing them to offset losses from defaults on mortgages and credit cards.
Now that investment banking profit is slipping, a pickup in earnings from retail banking is helping.
Income from JP Morgan's retail banking division, which largely accounted for the sharp decline in loan loss provisions, jumped to $907m (€650m) from just $7m (€5m) a year earlier.