J.P. Morgan Chase & Co. (NYSE: JPM) earned $2.7 billion this quarter, up +36% from $2.0 billion in the second quarter of 2008.

Morgan earned 28 cents a share, a -47% decline from 53 cents a share a year ago. The results reflected a charge of $1.1 billion, or 27 cents per share, associated with repaying $25 billion in government bailout funds, as well as a 10-cent-per-share penalty resulting from a special assessment from the FDIC.

The results far exceeded expectations, even with the one-time charges.

Morgan posted record revenue for the first half of the year, which it credited to a “notable” performance by its investment banking unit and “solid” performances in commercial banking, asset management, treasury services and retail banking.

The bank added $2 billion to its credit reserves, which now total $30 billion. After repaying the government, its Tier 1 capital ratio amounted to 9.7%. A bank with a 9.0% Tier 1 ratio is considered well capitalized.

Despite its strong results, Morgan’s shares fell slightly along with the rest of the banking sector, which was rattled by the woes of commercial lender CIT Group (NYSE: CIT), which is facing a cash crunch. Morgan’s shares have soundly beat the S&P for the year, gaining +14.6% since January 1st.

Goldman Sachs (NYSE: GS), the first major financial firm to report its quarterly earnings, also topped expectations, which helped fuel the sharpest three-day gain in the market in more than three months. Citigroup reports today, along with Bank of America, with results from other large financial firms coming in during the upcoming week.