JPMorgan Chase & Co posted record quarterly profits on Friday, up 34 per cent from a year earlier, as low interest rates and a recovering housing market brought big increases in mortgage lending.

The results signal the largest US bank is recovering from the so-called ‘London whale’ trades that resulted in losses of nearly $6 billion in the first half of the year but only a ‘modest loss’ in the latest quarter.

JPMorgan’s fixed income trading revenue rose, helped by the Federal Reserve program to buy mortgage debt for as long as unemployment remains high. That trading strength could bode well for investment banks including Goldman Sachs Group Inc and Morgan Stanley, which are due to report results over the next week.

JPMorgan said revenue from mortgage lending rose 36 per cent to $1.8 billion as low interest rates spurred refinancing and home purchases.

The US housing market is still recovering from the bubble that started deflating five years ago, but the bank said it is hopeful about the outlook for residential real estate. “We believe the housing market has turned the corner,” chief executive Jamie said in a statement.

Third-quarter net income was $5.71 billion, or $1.40 a share, up from $4.26 billion, or $1.02 a share, a year earlier.

Analysts had expected, on average, $1.24 a share, according to surveys by Thomson Reuters I/B/E/S. It was not immediately clear whether the analyst forecast was comparable to the reported results.

Profits at JPMorgan’s investment bank, excluding accounting adjustments for changes in the value of JPMorgan debt, rose to $1.7 billion from $1.2 billion a year earlier, when the European debt crisis cast a darker shadow over the capital markets.

JPMorgan shares were up 1.4 per cent in pre-market trading. Through Thursday the shares were up 27 per cent this year, almost twice the rise in the Standard & Poor’s 500 stock index but about three percentage points less than the KBW Bank stock index.