JPMorgan Chase & Co quarterly profit rocketed to forecast-beating $3.6 billion as bond trading revenue surged, boosting optimism about a strengthening rebound in top Wall Street banks.

JPMorgan shares rose 2.8 percent in early trading, leading the Dow Jones industrial average <.DJI> higher, after the second-largest U.S. bank said its dividend could rise early next year.

Investment banking drove JPMorgan's earnings in the third quarter, boding well for other large banks due to report later this week, including Goldman Sachs Group Inc and Citigroup Inc .

Most of JPMorgan's banking revenue gains came from bond trading, where rising asset values have helped Wall Street firms all year. Stock and bond underwriting revenue also rose jumped.

The investment bank reported net income of $1.9 billion, compared with $882 million a year earlier. That increase came in part from gains of $400 million on leveraged loans and mortgage-related securities that had a $3.6 billion writedown in the year-earlier quarter.

Trading gains lifted fixed income markets revenue to an eye-popping $5 billion, up from about $800 million a year earlier. Stock underwriting revenue rose 31 percent to $681 million, and bond underwriting fees rose 19 percent to $593 million.

JPMorgan as a whole posted third-quarter net income of 82 cents a share, compared with $527 million, or 9 cents a share, in the same quarter last year.

CFO Cavanagh said the bank could boost its annual per-share dividend to around 75 cents or $1 early next year if we're lucky. The bank cut the annual dividend to 20 cents a share from $1.52 in February.

In this environment, this is a championship performance, said Mike Holland, president of Holland & Co in New York.

Analysts on average had forecast earnings of 52 cents a share, according to Thomson Reuters I/B/E/S.

CREDIT CARD WOES

But JPMorgan also has sizable consumer lending businesses, where trends are a little harder to discern. The bank posted $700 million of losses in its credit card business in the third quarter, compared with a $292 million profit a year ago.

Still, credit card loans deemed uncollectable rose by just 1 percent, a big deceleration from a 25 percent increase in the second quarter. Chief Executive Jamie Dimon said it is not clear if initial signs of consumer credit stabilization will continue.

The card business is going through a substantial adjustment, Dimon said on a conference call with investors.

Overall credit costs climbed as the bank added $2 billion to its reserves against future losses on consumer loans, bringing total reserves to $31.5 billion.

Loan losses jumped and the bank reported $7 billion in net charge-offs on consumer loans on its books and held by investors, up from $3.3 billion a year earlier.

JPMorgan posted earnings of $302 million in its treasury and securities services unit, down 26 percent from a year earlier. That may bode poorly for earnings from companies in similar businesses, such as Northern Trust Corp and State Street Corp .

JPMorgan has remained among the healthiest U.S. lenders throughout the financial crisis. Earlier this year it repaid a $25 billion government bailout.

(Reporting by Elinor Comlay; editing by John Wallace)

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