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Earnings season welcomes the major banks, as JPMorgan Chase (JPM - Free Analyst Report) is the first of the group to release results. The bank has reported earnings of $1.09 a share for the June quarter, notably higher than our estimate of $0.80 and a dramatic improvement from results in the year-earlier period of $0.28. A reduction in loan loss reserves accounted for $0.36 a share of the bottom-line improvement, but this was partly offset by a $0.14-a-share charge for a bonus tax in the U.K.

During the quarter, the company's investment banking results fell back to a more normal level from the unusually strong performance in the previous three periods. But the retail financial services and credit card business returned to the profit column after a few quarters of losses, due to sharply lower credit costs.

We expect the company to continue to make progress on asset quality, but credit costs in the near term are likely to remain at historically high levels. Other headwinds include the expected reduction in revenues due to changes in overdraft fees (an estimated $700 million a year) and to recent credit card legislation ($750 million), neither of which is fully reflected in results yet.

Accordingly, we are not changing our share-net estimates for the next several quarters, but due to the better-than-expected June-period performance, our 2010 full-year projection rises to $3.80 a share, from $3.50. For 2011, we continue to look for earnings of $4.70 a share.

The stock may be of interest for its appreciation potential out to 2013-2015. Meanwhile, although the company plans to opportunistically buy back shares from time to time, it doesn't intend to increase the dividend until its credit costs decline more meaningfully and the economy moves farther along the recovery path.

Despite the bank’s solid second-quarter showing, JPM stock could not avoid the broader market’s decline, as its price slipped slightly lower in mid-morning trading. Shares of industry banking peers Citigroup (C) and Bank of America (BAC - Free Analyst Report), both of which are scheduled to report earnings one day later, were also down.

About The Company: JPMorgan Chase & Co. is a global financial services giant offering a variety of services with operations in over 50 nations. At the end of the first quarter of 2010, there were about 5,155 JPMorgan offices worldwide. Operational divisions include investment banking, treasury & securities services, asset management, commercial banking, retail financial services, card services, and private equity investment. The company had previously merged with Washington Mutual in September, 2008, Bank One in July, 2004, and Chase Manhattan in the final month of 2000.