JP Morgan Chase and Merrill Lynch continued to stretch Wall Street earnings growth yesterday, reporting rising profits from investment banking and retail financial services.

JP Morgan, which last week agreed to buy Bank One for $58 billion (€46 billion), reported net income for the year of $6.72 billion, up 304 per cent. Net income for the fourth quarter was $1.86 billion, against a $387 million loss a year earlier.

Merrill Lynch reported its highest annual earnings as well as its best single-quarter performance.

The $4 billion net income it reported for 2003 was 59 per cent higher than 2002, even though revenue rose just 8 per cent to $20.2 billion.

Merrill's fourth-quarter profit more than doubled to $1.2 billion.

Both companies benefited from the rising confidence of chief executives, who have started to bet on an improving economy. They are raising money through stock and debt sales as well as buying rivals.

The companies also benefited from the rising confidence of investors piling money into the stock market and other investment vehicles.

JP Morgan's investment bank had record annual earnings of $3.7 billion, up 183 per cent. It generated $834 million of fees in the fourth quarter, up 28 per cent. For the full year, Merrill's global markets and investment banking division had pre-tax earnings of $3.9 billion, up 65 per cent.

Profit at JP Morgan's existing branches, mortgage and credit card businesses increased 23 per cent to $560 million.

Merrill said its full-year pre-tax profit margin for 2003 of 28 per cent was the highest it had reported. Its full-year results included a $94 million post-tax gain.

Merrill's revenue for the quarter rose 17 per cent to $4.9 billion. It included $759 million from investment banking, a 32 per cent increase driven largely by debt and equity underwriting.

Merrill's expenses fell 6 per cent to $3.3 billion. Chief executive Mr Stan O'Neal has cut a third of the staff since 2001. But headcount rose by 300 people to 48,100 in the quarter.