JPMorgan Chase & Co. (JPM), the second- largest U.S. bank, said net income rose 13 percent, higher than analysts estimated, as investment-banking profit surged 49 percent and more customers paid credit cards on time.

Second-quarter net income climbed to $5.43 billion, or $1.27 a share, from $4.8 billion, or $1.09, in the same period a year earlier, the New York-based company said today in a statement. The average per-share estimate was $1.21, projected by 28 analysts surveyed by Bloomberg.

Fees from underwriting stocks and bonds boosted investment- banking revenue and improving credit trends let the bank reduce credit-card loss reserves by $1 billion. JPMorgan, led by Chief Executive Officer Jamie Dimon, was the most profitable U.S. bank in 2010 with a record $17.4 billion in earnings. Net income last year was buoyed by the release of $7 billion in reserves back into income as the U.S. economy improved, a benefit that Dimon, 55, said doesn’t represent “quality” earnings.

“I think these are really good numbers,” Michael Holland, who oversees more than $4 billion in assets at New York-based Holland & Co., said in an interview with Erik Schatzker on Bloomberg Television. “The only thing I can say is, ‘Wow,’” Holland said, referring to the company’s $26.8 billion in revenue.

Fixed Income

Second-quarter revenue jumped 7 percent as fixed-income and equity markets revenue climbed to $5.5 billion from $4.6 billion a year earlier, a 20 percent gain. JPMorgan’s fixed-income and equity trading results beat the estimates of $5.29 billion from Chris Kotowski, an Oppenheimer & Co. analyst, and $4.95 billion from Keith Horowitz, a Citigroup Inc. (C) analyst.

JPMorgan rose to $40.34 at 7:44 a.m. in New York trading from $39.62 at the close yesterday. The shares were down 6.6 percent this year through yesterday.

JPMorgan’s credit-card division, which lost money for all of 2009, generated $911 million in profit, or 17 percent of the bank’s net income for the quarter. The investment bank’s $2.06 billion of earnings accounted for 38 percent of the total.

Fewer consumers fell behind on their credit-card payments in the second quarter. Thirty-day delinquency rates dropped to 2.98 percent from 4.96 percent in the same quarter of 2010 and 3.57 percent in the first quarter of 2011. The rate of credit cards charged off as bad debt also fell, to 5.82 percent from 10.2 percent the prior year and 6.97 percent in the previous quarter.

“Within our wholesale credit portfolio, credit trends appear to have normalized,” Dimon said in the statement.

Credit Losses

Provisions for credit losses dropped 46 percent to $1.81 billion from $3.36 billion as defaults and late payments declined. The bank released $1.2 billion of reserves held against future losses back into earnings.

“You continue to get reserve releases, which mean that your headline earnings-per-share numbers beat” estimates, said Paul Miller, an analyst at FBR Capital Markets Corp., in an interview earlier this week. “Investors see that as poor quality and instead look at the underlying fundamentals, pretax pre-provision profits or your underlying revenue numbers.”

Investors already know that fewer borrowers are defaulting, allowing banks to bolster profit by lowering reserves, said Miller, a former examiner at the Federal Reserve Bank of Philadelphia.

The retail bank, which includes mortgages, consumer bank accounts and small business lending, posted a $582 million profit, from a $1.04 billion gain a year before and a $208 million loss in the first quarter.

The division benefited from a $587 million reduction in provisions to $1.13 billion, JPMorgan said.

Mortgage Costs

“We have already incurred significant costs, charged-off substantial amounts and established significant reserves for mortgage-related issues,” Dimon said in the statement. “Unfortunately, it will take some time to resolve these issues and it is possible we will incur additional costs along the way.”

Capital One Financial Corp., this year’s best-performing major U.S. bank stock, said yesterday that net income rose 50 percent to $911 million as it set aside fewer provisions for loan losses.

Citigroup, the third-biggest U.S. lender behind JPMorgan and Bank of America Corp. (BAC), may report a second-quarter profit of $2.95 billion when it releases results on July 15, the survey of analysts shows. Charlotte, North Carolina-based Bank of America may report a profit of $3.08 billion on July 19, and San Francisco-based Wells Fargo & Co. (WFC) may say it earned $3.75 billion when it announces results the same day.

Europe Crisis

The sovereign debt crisis in Europe and slowing economic growth in the U.S. depressed trading volume and curtailed revenue in the second quarter as investors bought and sold fewer bonds and equities, according to analysts including Kotowski at Oppenheimer.

U.S. central bankers said last month that the economy will expand 2.7 percent to 2.9 percent this year, down from forecasts ranging from 3.1 percent to 3.3 percent in April. The revised outlook was the second time this year that Federal Reserve officials lowered their forecasts for growth.

Home prices have fallen since mid-2010 and may continue to suppress bank revenue and earnings. A further decline in property values of 10 percent to 25 percent over the next five years “wouldn’t surprise me at all,” Robert Shiller, who helped create the S&P/Case-Shiller Index of property values, said last month.