(Bloomberg News)  JPMorgan Chase & Co., the second- biggest U.S. bank by assets, said profit rose 67% to a second straight record as provisions for bad mortgages and credit-card loans tumbled.

First-quarter net income climbed to $5.56 billion, or $1.28 a share, from $3.33 billion, or 74 cents, in the same period a year earlier and from $4.83 billion, or $1.12, in the fourth quarter, the New York-based company said today in a statement. The results beat the average per-share estimate for adjusted earnings of $1.15 by 26 analysts surveyed by Bloomberg.

Provisions for credit losses dropped 83% to $1.17 billion as defaults and late payments declined. JPMorgan, led by Chief Executive Officer Jamie Dimon, posted a record $17.4 billion in earnings last year, in part by releasing about $7 billion of reserves against bad loans back into income as the U.S. economy improved. Dimon, 55, has said he doesn't consider reserve releases as "quality" earnings because they don't represent growth in the bank's businesses.

"This is setting the bar very high for the others, and this major beat of the estimate is going to be tough for others to follow," Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York, said in an interview with Tom Keene on Bloomberg Radio. JPMorgan is the first of the largest U.S. banks to report earnings.

Fixed Income

JPMorgan rose 1.3% to $47.26 in New York trading at 8:31 a.m. The shares were up 10% this year through yesterday.

First-quarter revenue fell 8% to $25.8 billion. Fixed-income and equity markets revenue was $6.6 billion, compared with $6.9 billion a year earlier and $4 billion in the fourth quarter.

The retail bank posted a $208 million loss. Dimon said in the statement that the business had "good underlying performance" that was "more than offset by the extraordinarily high losses we still are bearing on mortgage-related issues. Unfortunately, these losses will continue for a while."

The company took a $1.1 billion charge against mortgage- servicing assets related to a pending consent agreement with regulators over foreclosure practices, Chief Financial Officer Doug Braunstein told reporters on a conference call. The accord may be announced later today, Dimon said.

Citigroup Inc., the third-biggest behind JPMorgan and Bank of America Corp., may report first-quarter profit of $2.78 billion when it releases results on April 18, the survey of analysts shows. Charlotte, North Carolina-based Bank of America may report a profit of $2.99 billion on April 15.

Credit Cards

JPMorgan's credit-card division, which lost money for all of 2009, generated $1.34 billion in profit, or 24% of net income for the quarter. The investment bank's $2.37 billion of earnings accounted for 43% of the total.

Fewer consumers fell behind on their credit-card payments in the first quarter. Thirty-day delinquency rates dropped to 3.57% from 5.6% in the same quarter in 2010 and 4.1% in the fourth quarter. The rate of credit cards charged off as bad debt also fell, to 7% from 11.8% the prior year and 7.9% in the previous quarter.

The loss in retail banking, which includes home loans and checking accounts, compared with $708 million of profit during the fourth quarter and a $131 million loss a year earlier. The division benefited from a $2.4 billion reduction in provisions to $1.3 billion, JPMorgan said.

'Right Direction'

Home prices, which stabilized early last year, have fallen every month since the middle of 2010 and may slow reserve releases, which are determined in part by economic forecasts, said Jason Goldberg, a senior analyst with Barclays Capital in New York.

"The most important things should be moving in the right direction, but you're not yet firing on all cylinders," Goldberg said.

Loan growth remains slow and net interest margins, which measure the profitability of lending, continue to narrow at U.S. banks. Bank loans and leases fell $87.4 billion to $6.97 trillion from the end of 2010 through March 30, or 1.3%, according to Federal Reserve data.

Net income in investment banking declined 4%, to $2.37 billion in the first quarter from $2.47 billion the year before.

JPMorgan and other large banks, which have benefited from record low costs of funding mortgages and other assets, face a squeeze on net interest margins -- the difference between what they pay to borrow money and what they get for loans and on securities.

'Kind of Lackluster'

The net yield on interest-earning assets -- what the bank collects on interest on loans and securities minus what it pays out on deposits and other borrowings -- rose to 2.89% in the first quarter, from 2.88% in the fourth quarter and 3.32% a year earlier.

"In aggregate, it's kind of lackluster," said Moshe Orenbuch, a bank analyst for Credit Suisse Group AG in New York. "Net interest is still declining. Mortgage-banking revenues are going to be under pressure because volumes are under pressure and spreads are under pressure."

Financial companies recorded losses and writedowns of more than $2 trillion stemming from the housing crisis and rising U.S. joblessness, according to data compiled by Bloomberg. The pace of new problem loans eased over the past three quarters as the U.S. economy recovered, even after the federal government withdrew support from financial markets.