JPMorgan Chase & Co. (JPM), the biggest U.S. bank by assets, posted a record third-quarter profit that beat analysts’ estimates as mortgage revenue soared 72 percent.

Net income rose 34 percent to $5.71 billion, or $1.40 a share, from $4.26 billion, or $1.02, a year earlier, the New York-based company said today in a statement. Earnings, which included a loss on accounting adjustments, beat the average estimate of $1.20 among 30 analysts surveyed by Bloomberg.

JPMorgan’s wrong-way bet on credit derivatives cost the bank $5.8 billion in the first half of 2012, prompting investigations from U.S. and international authorities. The loss during the third quarter was “modest,” JPMorgan said today without giving a figure. Chief Executive Officer Jamie Dimon, 56, got help restoring investor confidence from historically low interest rates and government programs that fueled demand for home loans, contributing to the first profit increase in five quarters.

“The housing market has turned the corner,” Dimon said in the statement. “We were encouraged that credit trends continued to modestly improve, and, as a result, the firm reduced the related loan-loss reserves by $900 million.”

Shares of JPMorgan rose to $42.38 as of 7:18 a.m. in New York from $42.10 at the close yesterday. The stock was up 27 percent this year before today, while the KBW Index of the largest banks rose 30 percent.

Revenue Gains

Revenue climbed 6 percent to $25.9 billion from $24.4 billion during the third quarter of last year. At the investment-banking unit, it fell 1 percent to $6.28 billion from $6.37 billion.

Fixed-income and equity-markets revenue was virtually unchanged at $4.76 billion from $4.75 billion a year earlier and $4.98 billion in the second quarter, the company said. The investment bank’s credit portfolio, which contains the remaining credit derivatives position, generated $90 million in revenue from $578 million in the third quarter of last year.

Trading and the investment bank’s credit portfolio declined by $211 million because of a so-called debt-valuation adjustment in the third quarter as the price of the bank’s debt rose.

Retail banking, which includes home loans and checking accounts, earned $1.41 billion, up 21 percent from $1.16 billion a year earlier. Net interest margin, which measures the profit margin on lending, narrowed to 2.43 percent from 2.66 percent a year earlier.

Mortgage Incentives

JPMorgan benefited from gains in mortgage lending as low interest rates and federal incentive programs encouraged homeowners to refinance. Mortgage fees and related revenue totaled $2.38 billion, compared with $1.38 billion a year earlier. Demand for loans also rose as the unemployment rate fell to 7.8 percent in September from 9.0 percent a year ago.

Fewer consumers fell behind on their credit-card payments in the third quarter compared with the same period in 2011. Loans at least 30 days overdue, a signal of future write- offs, fell to 2.15 percent from 2.9 percent in 2011. Write-offs dropped to 3.57 percent from 4.7 percent the prior year and 4.35 percent in the previous quarter. Industrywide, U.S. credit-card delinquencies were 2.32 percent in August, down from 3.04 percent a year earlier, according to Moody’s Investors Service.

Home Loans

Residential mortgage volume in the U.S. rose about 33 percent to $412 billion in the third quarter from a year earlier, spurred by incentives to refinance, according to estimates by the Mortgage Bankers Association. Corporate bond sales surged 66 percent to $987.3 billion in the three-month period from the same quarter last year, data compiled by Bloomberg show, as the Federal Reserve tried to boost the economy by lowering borrowing costs.

JPMorgan set aside $684 million more toward its litigation costs during the third quarter mostly for mortgage-related lawsuits. Dimon previously told shareholders that the company would be making as much as $24 billion in annual profit if it weren’t for all of its mortgage losses.

The banking industry has been cutting staff and reducing expenses to mitigate slowing global economic growth and historically low interest rates that have compressed profit margins on lending and yields on investments.

IMF Forecast

The International Monetary Fund lowered its economic forecasts this week as the euro area’s debt crisis intensified. It also warned that global economic growth could be even weaker if officials in the U.S. and Europe fail to address threats to their economies.

The IMF reduced its global growth estimate for 2012 to 3.3 percent from 3.5 percent, the slowest since the 2009 recession, and lowered its projection for next year to 3.5 percent from 3.9 percent. The Washington-based lender now sees “alarmingly high” risks of a steeper slowdown, with a 1-in-6 chance of growth slipping below 2 percent.

JPMorgan has regained more than $41 billion of the $51 billion in market value it lost after Bloomberg News first reported on April 5 that the company had amassed an illiquid book of credit derivatives at its chief investment office in London. Dimon initially dismissed the news as a “tempest in a teapot” when the bank reported first-quarter earnings.

The botched bets spawned a series of management changes and dismissals, beginning with Chief Investment Officer Ina Drew, 56, who retired four days after the loss was disclosed on May 10.

Tse, Zubrow

Two senior managers announced plans to depart last week. Irene Tse, who ran the CIO for North America under Drew, told employees she’s leaving to start a hedge fund. Former Chief Risk Officer Barry Zubrow, who now runs JPMorgan’s lobbying operation, said Oct. 5 that he will retire at year-end.

Chief Financial Officer Douglas Braunstein, 51, may also leave his position and join the firm’s investment bank, where he previously led dealmaking, according to a person with direct knowledge of the matter.

Braunstein, who was promoted to CFO in June 2010, is likely to remain in that role through the end of the year, said the person, who requested anonymity because a decision on the move isn’t final. The finance chief was passed over for promotion when Dimon elevated Matt Zames, 41, to co-chief operating officer and required Braunstein to report to him instead of Dimon.

The firm also is being probed over the possible gaming of U.S. energy markets and was subpoenaed in global investigations of interest-rate fixing in London.

Bloomberg