JPMorgan Chase (JPM) posted a better-than-expected profit of $2.1 billion, or 40 cents a share, in the first quarter, the biggest U.S. bank announced this morning. But it also set aside a huge chunk of money to cover future losses on loans, indicating that it isn't expecting a quick recovery for the economy.

Despite beating analysts' expectations of $1.8 billion, or 32 cents a share, in profit, JPMorgan said net income fell some 10 percent from the first quarter of last year. Not surprisingly, its credit card division was largely responsible. After booking a profit of $609 million in the first three months of 2008, it lost $547 million over the same span this year.

Credit costs came to $10 billion, and the bank put aside $4 billion to cover future loan defaults, a sign that it remains pessimistic about the direction the economy is headed despite its quarterly results.

Today's announcement suggest the situation may already be worse than expected. After predicting that the credit card division's net charge offs, or the percentage of loans written off as unrecoverable, would rise to 7 percent in the first quarter, JPMorgan saw them go even higher, to 7.72 percent.

CEO Jamie Dimon said there's probably more to come.

"It is reasonable to expect additional increases to credit reserves if the economic environment worsens," he said in a statement accompanying the announcement.

But even huge credit losses couldn't dampen a blockbuster quarter from the company's retail and investment banking divisions, where revenue surged 177 percent and 85 percent, respectively.

Both units are benefiting from short-term interest rates that are falling thanks to efforts by the government efforts to relieve last year's credit crunch. As a result, banks like JPMorgan can borrow at lower interest rates than they lend. A steepening yield curve, as it's known, also affects the prices of some complex investments the company has on its books.

If investors took last week's announcement of a record quarter at Wells Fargo (WFC) as a surprise, and skeptically viewed the news of better-than-expected earnings from Goldman Sachs (GS) as a coincidence, they'll probably take JPMorgan's results as confirmation of a trend of better performance from banks.