Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM), the No. 2 and No. 3 U.S. banks, on Wednesday posted higher-than-expected third-quarter profits as increased trading revenues kept them competitive with their biggest rivals.

Profit rose 10 percent at Bank of America (search), and JPMorgan (search) posted a 78 percent increase. On Monday, Citigroup Inc. (C), the largest U.S. bank, said profit rose 35 percent, helped by the sale of an insurance unit.

JPMorgan also said Chief Operating Officer Jamie Dimon (search) will replace William Harrison as chief executive on December 31, six months early. Analysts have considered Dimon the company's leader since JPMorgan acquired his Bank One Corp. last year.

Banks are benefiting from a rebound in trading of such things as stocks, bonds and currencies. Several Wall Street investment banks reported similar gains last month.

In morning trading on the New York Stock Exchange, shares of Bank of America rose 1.5 percent and JPMorgan rose 2 percent. Both shares this year have lagged the Philadelphia KBW Bank Index, which on Wednesday fell 0.4 percent.

Charlotte, N.C.-based Bank of America said net income rose to $4.13 billion, or $1.02 per share, from $3.76 billion, or 91 cents, a year earlier.

Excluding merger costs, profit totaled $1.04 per share. On that basis, analysts polled by Reuters forecast $1.02 a share.

Revenue rose 16 percent to $14.81 billion, beating forecasts for $14.14 billion. Non-interest expense increased just 4 percent to $7.29 billion.

"Results were terrific," said Stephen Berman, a portfolio manager at Stein Roe Investment Counsel. "Margin was stable, it had good loan growth, and it had very good income from market-sensitive parts of its investment bank."

Fee income surged 39 percent to $6.83 billion. Card income rose 21 percent to $1.52 billion, equity investment gains tripled to $668 million, and trading account profits nearly tripled to $514 million.

But the bank set aside $1.16 billion for bad loans, up 78 percent, including $50 million for Hurricane Katrina. Net chargeoffs also rose, and included $209 million for airlines.

Chief Executive Kenneth Lewis reorganized business and investment banking in the quarter. Last year he acquired FleetBoston Financial Corp., and in June he agreed to pay $35 billion for MBNA Corp. (KRB).

On CNBC television, Lewis said he would be "opportunistic" in making acquisitions. "We never say never," he said.

Bank of America is in the process of acquiring credit card company MBNA Corp. which on Wednesday said profit fell 1 percent to $717.9 million, or 56 cents per share. Analysts forecast 53 cents.

New York-based JPMorgan said net income rose to $2.53 billion, or 71 cents a share, from $1.42 billion, or 39 cents.

Excluding merger charges, operating earnings were 75 cents per share. On that basis, analysts expected 72 cents. JPMorgan also took a $248 million charge for Katrina.

"The big beat came from trading," according to Jeff Harte, an analyst with Sandler O'Neill & Partners LP.

Net revenue rose 15 percent to $15.55 billion. Investment bank profit surged 70 percent to $1.1 billion on record trading revenue across all areas, and as fees rose 8 percent to $985 million, with strength in Europe.

Analysts welcomed the early handover to Dimon, who said the bank's performance could be improved further.

"Most of the management team feels that we are not a lean and mean competitor," Dimon told a call with analysts.