JPMorgan Chase Makes the Turn, Sort Of

As a shareholder of JPMorgan Chase (NYSE:JPM), I should be very happy with today's results. The company beat the median estimates for the second quarter by a pretty good clip, posting strong overall growth, and the stock traded up meaningfully in response. And yet, curmudgeon that I am, I'm not as happy as I'd like to be with the report.

It certainly looked like a fine quarter. Revenue jumped 19%, and JPMorgan's year-over-year growth in operating earnings and income was considerable whether or not you add back last year's charge for litigation expenses. Likewise, return on equity and assets both improved, though there's a ways to go here before they're "good" again.

What I'm about to nitpick has to do with how the company did so well. Growth was fueled most strongly by the investment-banking business; revenue there jumped 52%, and income jumped 37%, due in part to strong banking fees and debt trading revenue. Looking at the retail banking business, though, there's still a lot of work to be done: Deposit growth was OK, but net interest income was flat, and overall segment income was down.

I know, it seems like a minor thing to obsess about -- particularly when other businesses like treasury services and wealth management continue to grow nicely. I guess I would just feel more comfortable if I saw better top-line results in retail banking and card services -- those are typically more reliable businesses than investment banking, and they need to improve before JPMorgan can really be healthy again.

I invested my own money in JPMorgan shares principally because I did (and do) see a lot of potential in turning this business around. Even if the company can't completely close the gap between its returns on equity and those of a peer like Citigroup (NYSE:C) or Bank of America (NYSE:BAC), I think there is still plenty of potential for gains from the shares.

Turnarounds are tricky business, though, so risk-averse Fools might do better with more stable banking ideas like the two aforementioned companies or others like Wachovia (NYSE:WB) and Wells Fargo (NYSE:WFC). After all, pure stock price appreciation isn't the ultimate criterion to use: It's the trade-off between those returns and your appetite for the risk involved.

For more bankable Foolishness:

• Is JPMorgan Chase Out of the Woods?
• Playing the World Through Citigroup
• Can Goldman Keep Its Luster?

JPMorgan and Bank of America are Motley Fool Income Investor recommendations. Click here to see the full portfolio of market-beating dividend payers.

Fool contributor Stephen Simpson owns shares of JPMorgan, but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares).