JPMorgan Chase (JPM 1.52%), the largest U.S. bank in terms of assets, was the first big bank to report its second-quarter earnings on Friday morning, and it did not disappoint. The bank surpassed earnings estimates and posted a massive surprise in trading revenue. Here's a rundown of the numbers, and why JPMorgan Chase looks like the winner of earnings season -- so far.

The headline numbers

JPMorgan Chase's second-quarter earnings of $2.29 per share topped analysts' expectations of $2.22. This represents 26% earnings growth from the same quarter a year ago.

Lobby of a Chase banking branch with modern ATMs.

Image source: JPMorgan Chase.

To be fair, some of the bank's earnings growth was due to the lower corporate tax rate that came with the Tax Cuts and Jobs Act, but the bank's revenue also grew by 6% to $28.4 billion. In other words, it didn't post impressive earnings just because of tax reform -- the business is generating more money as well.

Impressive results all around

One area that was a big positive surprise was trading revenue, which handily exceeded expectations and even beat JPMorgan's own estimates. In May, JPMorgan Chase said it expected flat trading revenue during the quarter, but the $5.4 billion in revenue beat those expectations by about 13%. And, the performance exceeded expectations on both the fixed-income trading side ($3.5 billion versus $3.18 billion expected) and the stock trading side ($2 billion versus $1.7 billion). So, all-around strong trading revenue was a big positive surprise.

In addition, there were several other encouraging figures in the bank's report. Just to name some of the most significant:

  • Investment banking revenue of $1.9 billion was about $200 million more than expected.
  • JPMorgan Chase's loan portfolio grew by 4% year over year.
  • The bank's return on equity (ROE) of 14% is well in excess of the 10% industry benchmark and is the highest among the big banks that have reported earnings so far.
  • The corporate and investment banking segment achieved the No. 1 market share in global investment banking fees.
  • The asset and wealth management segment now has $2 trillion under management, an 8% year-over-year increase.
  • JPMorgan Chase's efficiency ratio of 56% is among the best of the big banks.
  • As we learned a few weeks ago, JPMorgan Chase is increasing its dividend to $0.80 per share from $0.56 starting in the third quarter, a 43% increase.

Not all great news

While JPMorgan Chase's second-quarter earnings report was generally strong, there were a couple of negative surprises worth mentioning.

First, JPMorgan Chase's yield on interest-earning assets (interest margin) of 2.46% represented a decline of two basis points from the first quarter. Generally, a rising-rate environment like the one we're in translates into higher margins, so this is definitely a trend to watch.

Additionally, the bank took an unexpected $330 million charge in its credit card business, thanks to higher-than-expected spending on rewards programs. This isn't the worst problem to have, as it means the bank's credit card products are successfully bringing in business, but it is an additional expense in the short run. On the positive side, the bank's credit card sales volume increased by nearly 11% since last year.

The early winner of bank earnings

Three big banks reported earnings on the first Friday of earnings season: JPMorgan Chase, Citigroup, and Wells Fargo. Wells Fargo missed expectations, and it looks like its scandals are still weighing on results. Citigroup's revenue was weaker than analysts had been hoping for, and unlike JPMorgan Chase, Citigroup's trading revenue came in well below expectations.

While there are still a few big banks left to go, JPMorgan Chase looks like the clear early winner of earnings season in the financial sector.