NEW YORK – The good news is that JPMorgan Chase & Co. said Wednesday that second-quarter profit jumped 20 percent, as the nation’s third-largest bank collected more investment banking fees than ever.

The bad news is that it said it tripled the amount of money it has socked away in case its loans go sour, signaling to investors that lending is getting riskier for the financial sector. The New York-based bank’s shares fell more than 2 percent.

JPMorgan said net income totaled $4.2 billion, or $1.20 a share, in the April to June period, up from $3.5 billion, or 99 cents a share, in the same period a year earlier. Revenue rose 25 percent to $18.91 billion from $15.09 billion.

The results _ driven by higher profits in investment banking, asset management, Treasury and securities services, and private equity _ easily beat estimates and offset a profit decline in JPMorgan’s retail banking business. Analysts surveyed by Thomson Financial had forecast earnings of $1.09 per share on $17.62 billion in revenue.

The company’s mortgage banking business improved, but with investors worried that the weak housing market will cause mortgage delinquencies and defaults to keep rising, Wall Street zeroed in on JPMorgan’s precautions.

JPMorgan beefed up its total provision for credit losses to $1.53 billion in the second quarter from $493 million in the same period a year ago. The credit loss provision for its investment banking unit _ which is exposed to subprime lending _ rose to $164 million, compared with a benefit of $62 million last year. Its retail banking credit loss provision rose to $587 million from $100 million.

“Although we remain at a relatively benign point of the credit cycle, we continue to focus on being prepared for a less favorable environment,” said Jamie Dimon, JPMorgan’s chairman and chief executive, in a statement.

Flat or falling home prices in certain regions prompted the provision boost, as did a surge in charge-offs, or debts that a bank writes off as uncollectable.

JPMorgan’s home equity business involves prime lending, but Chief Financial Officer Michael J. Cavanagh said the bank’s decision to increase its credit loss provisions does not reflect a spillover of subprime lending problems into prime lending. Prime loans are given to people with good credit histories; subprime loans are made to those with poor credit.

“We don’t think conditions are bad by any stretch of imagination,” Cavanagh said in a conference call with journalists. “It’s more of a home price issue; it’s less about borrowers’ ability to pay.”

JPMorgan’s results Wednesday underlined a common problem among banks _ that lending is getting chancier _ and a popular solution: Focusing on fees and stockpiling provisions.

Two smaller banks, Comerica Inc. and Marshall & Ilsley Corp., both reported second-quarter earnings Wednesday that beat expectations as they amassed more in fees, and fattened their loan loss provisions as write-offs climbed. After the bell Wednesday, Washington Mutual, the nation’s biggest savings bank, also raised its provision for loan and lease losses, even though improved results in home lending helped drive up second-quarter profit by 8 percent.

JPMorgan’s income from investment banking rose 41 percent to $1.18 billion, compared with the year-ago period. Investment banking is the business JPMorgan has devoted the most resources to lately, and which has turned out the greatest profits in recent quarters.

Second-quarter profit from retail banking, meanwhile, declined 10 percent to $785 million from $868 million, hurt by decreases in regional banking and auto finance.

JPMorgan shares fell $1.04, or 2.1 percent, to close at $48.88 _ in the upper half of their 52-week range, but down from a May peak above $53. A Punk Ziegel & Co. analyst, anticipating “turmoil” in the market as the financial sector reevaluates its investments, downgraded JPMorgan, along with rivals Bank of America Corp. and Citigroup Inc.

JPMorgan is one of many banks issuing the billions of dollars worth of mortgage-backed bonds that Standard & Poor’s and Moody’s recently said they would downgrade. It was also a creditor of two hedge funds that Bear Stearns Cos. said late Tuesday have become practically worthless. The funds were invested in mortgage-backed securities.

Dimon said in a conference call with analysts that “we were a little bit behind” in avoiding losses from the Bear Stearns funds, but that overall, “we always have excess collateral.” The CEO also said that in the bank’s investment banking business, loss rates related to certain subprime loans were worse than expected, but better than the average bank’s.

Profit from Treasury and security services soared to a record $352 million; asset management profit jumped to a record $493 million; and private equity gains more than doubled to $1.3 billion. JPMorgan’s private equity portfolio rose to $6.5 billion from $5.6 billion last year.

Profit from JPMorgan’s credit card business fell to $759 million from $875 million a year ago, when results were helped by a change in bankruptcy law.

Commercial banking profit rose to $284 million from $283 million.

A service of the Associated Press(AP)