JPMorgan Chase (NYSE: JPM) reported a first-quarter profit of $5.6 billion, or $1.28 per share, on Wednesday.

When these numbers are released, I always like to dig into the earnings supplemental and find out exactly where the income came from. Broken out by segment, here's how it looked last quarter:


Q1 2011 Net Income

Q1 2010 Net Income

Investment bank $2.4 billion $2.5 billion
Retail financial services ($208 million) ($131 million)
Card services $1.3 billion ($303 million)
Commercial banking $546 million $390 million
Treasury and securities services $316 million $279 million
Asset management $466 million $392 million
Corporate/private equity $722 million $228 million
Total: $5.6 billion $3.3 billion

Retail banking was bad. Commercial banking was decent. Cards were fairly good. Investment banking was very good. An odd showing. The first quarters of both this year and last year were somewhat of anomalies. Investing banking typically doesn't make up such a huge portion of net income.

Since it's so important, let's break down investment banking. Broken out by revenue, here are the individual segments that make up the division:

Investment Banking Segment

Q1 2011 Revenue

Q1 2010 Revenue

Advisory $429 million $305 million
Equity underwriting $379 million $413 million
Debt underwriting $971 million $728 million
Fixed-income markets $5.2 billion $5.5 billion
Equity markets $1.4 billion $1.5 billion
Credit portfolio ($190 million) ($53 million)

Fixed-income markets -- which is actually fixed-income, currency and commodities -- was the real winner.

As CFO Doug Braunstein noted on a conference call, "commodities was one of those asset classes that had very strong performance." He added, "commodity revenue, like all of the other businesses this quarter, was predominantly client flow," meaning it came from servicing client accounts, rather than proprietary bets, although the latter helped as well.

None of this is terribly surprising. Mideast uprising sent oil surging during the quarter. Japan's earthquake sent currencies tumbling, then surging, then tumbling anew. This is as good as it gets for traders, and almost as good for the banks servicing their trades.

But it's all very interesting. Most investors think of JPMorgan as a bank that lends money. Like banks should. And JPMorgan does, but most of its profits lately have come from something very different: trading. This isn't unique to JPMorgan. It's really an industrywide phenomenon over the past several years. And trading income is very transitory -- here today, gone tomorrow, back with a vengeance next week. Volatility like that typically warrants a low valuation multiple to make up for uncertainty. This actually might partially explain why banks such as JPMorgan, Bank of America (NYSE: BAC), and Citigroup (NYSE: C) trade at what seem like low valuations. Investors aren't valuing them as banks. They're being valued for what they've shown themselves to be lately: trading shops.

What do you think?