JPMorgan Chase & Co's robust $3.6 billion quarterly profit could prove a tough act for rivals to follow as its investment bank capitalized on the disappearance of some rivals and the weakness of others.

The second largest U.S. bank by assets, and largest by market capitalization, reported much-better-than-expected results as bond trading revenue surged and it benefited from last year's purchases of Bear Stearns and Washington Mutual.

The results, which boosted the bank's shares 3.3 percent to a 52-week high, cement JPMorgan's position as one of the few banks that has emerged stronger from last year's Wall Street meltdown.

They've come through the crisis impeccably well, said Bill Fitzpatrick, analyst at Optique Capital Management.

Rivals Citigroup Inc and Bank of America Corp , which report on Thursday and Friday respectively, already lag JPMorgan's investment bank -- which is ranked number one in global league tables for debt and equity underwriting.

That unit reported net income of $1.9 billion, up from $882 million a year earlier, and made up the lion's share of JPMorgan's 580 percent increase in earnings.

JPMorgan's earnings were not uniformly positive.

As expected, losses on loans still rose and net charge-offs on consumer loans climbed to $7 billion. But Citi and Bank of America may get even harder hit by such losses.

Bank of America and Citi -- the largest and third largest banks respectively -- also labor under $45 billion in bank bailout funds that tie them to compensation restrictions and hobble their ability to compete.

Year to date, JPMorgan shares have climbed 50 percent and Bank of America shares are up 32 percent. Citi shares have fallen 26 percent.

In fact, former investment bank Goldman Sachs Group Inc , which reports its results on Thursday, is the firm most likely to rival JPMorgan's performance. Goldman's shares have more than doubled this year.

The higher quality companies like JPMorgan and Goldman Sachs have been able to take market share away and I think that trend will continue, said Robert Lutts, chief investment officer at Cabot Money Management.

While both are clearly picking up client business, it is unclear whether they can maintain high profits from trading. Both reported a record first half from their investment bank divisions and JPMorgan's fixed income division delivered an eye-popping $5 billion in revenue in the third quarter -- JPMorgan executives warned that this is not sustainable.

JPMorgan as a whole posted third-quarter net income of 82 cents a share, compared with 9 cents in the same quarter last year and soundly beat analysts' forecast of 52 cents a share, according to Thomson Reuters I/B/E/S.

OFFSETTING CREDIT LOSSES

Unlike Goldman, JPMorgan also has the advantages and disadvantages of running a large commercial bank and credit losses there showed signs of stabilizing.

But Chief Executive Jamie Dimon, whose risk avoidance skills have commanded growing respect on Wall Street and in Washington, warned on a conference call that it is too early to conclude the tide has turned on rising loan losses.

JPMorgan lost $700 million in its credit card business, compared with a $292 million profit a year ago.

Loan losses jumped overall 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.

Still, revenue rose 79 percent to $28.8 billion, bolstered by last year's Washington Mutual takeover which added deposits to the retail bank and Bear Stearns, which lifted JPMorgan in the investment bank league tables.

Chief Financial Officer Mike 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.

The strong investment banking results follow a recent shakeup which saw asset management head Jes Staley named as its head, raising questions about who was best positioned to succeed Dimon. Cavanagh has also been cited as a potential successor.

Dimon, 53, is not expected to leave any time soon. He told analysts the management changes were part of his efforts to protect the longer-term health of the company.

In another bid to look after the bank longer term, Dimon -- who received about $19.7 million in compensation in 2008 -- said he is committed to paying staff appropriately and believes the bank's pay guidelines are broadly in line with those coming from regulators globally.

JPMorgan has set aside $8.79 billion for compensation in its investment bank unit so far this year. That amounts to $353,834 per employee, up from $210,854 per employee in the equivalent period a year ago. Median household income in the United States for 2008 was about $50,300.

White House spokesman Robert Gibbs said on Wednesday that Wall Street pay has to be based on a reasonable assumption of risk, not speculation.

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

(Reporting by Elinor Comlay, additional reporting by Steve Eder and Dan Wilchins; editing by John Wallace and Tim Dobbyn)

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