JPMorgan Chase Earns $2.7 Billion

July 16, 2009— -- Wall Street got another pleasant surprise this morning, when JPMorgan Chase reported a second-quarter profit of $2.7 billion, an increase of 36 percent from the same period last year.

That's right. The nation's largest bank (by market capitalization) posted a profit, leading some to see this as a strong sign that the battered banking industry, and the U.S. economy as a whole, might finally be on the road to recovery.

Today's earnings report, which exceeded analyst expectations, comes two days after Goldman Sachs reported a $3.44 billion profit in the second quarter. Investors now look ahead to tomorrow's earnings reports from Bank of America, Citigroup and General Electric, which has a large lending arm.

"While we do not know if the economy will deteriorate further, we feel confident we can continue to reinvest in our businesses and do well for our clients, communities and shareholders over the long term," JP Morgan CEO Jamie Dimon said in a statement this morning.

"During the quarter, we maintained our efforts to support economic recovery and to help keep people in their homes," Dimon said.

Both JP Morgan and Goldman Sachs -- as well as all other major U.S. banks -- borrowed money at the end of 2008 from the federal government to help shore up their balance sheets. JP Morgan received $25 billion in TARP funds last fall, and Goldman received $10 billion.

"Banks are finally doing what they are supposed to be doing: They're making a lot of money," ABC's "Good Morning America" correspondent Bianna Golodryga said this morning from the floor of the New York Stock Exchange.

Banks and Wall Street's Good Sign

But the big question is: Does a reversal in the bank system really mean that we are going to see a reversal for consumers and in the economy in general?

"And the answer is: not really. The two aren't really directly related," Golodryga said. "If you look at where banks are still suffering, they are suffering on the consumer side. JP Morgan announced they saw credit losses nearly double from a year ago. Where they are making a ton of money, however, is in their investment banking and trading divisions. And that in itself is a good sign because it's showing that the credit markets are starting to ease."

JP Morgan said strength in its core consumer and investment banking businesses offset a jump in credit losses during the quarter. Second-quarter net income rose to $2.72 billion from $2 billion a year earlier. Profit per share fell to 28 cents from 53 cents. Net revenue jumped 41 percent to $27.71 billion.

Wall Street however seems to like the news this week, with the Dow Jones industrial average closing Wednesday up 256 points. Stock futures were essentially flat this morning after JP Morgan's announcement.

There are also other fresh signs of both recovery, and that things would get worse for some before they get better.

"We're seeing two sides of the story here," Golodryga said. "On the one hand we did get some positive news. We saw that credit card delinquencies actually went down for the first time in a long time during the month of June. The Federal Reserve actually came out and said they revised their outlook for the economy. Instead of contracting 2 percent, now they expect it to contract by 1.5 percent. But they also expect unemployment to hit 10.1 percent by the end of the year. That is a hard number to swallow: one out of every 10 Americans without a job."

With reports from ABC News' Zunaira Zaki.