JPMorgan Chase & Co, the biggest US bank, said it had generated $4.4 billion of credit trading losses in its London offices.
But it posted overall profit that was barely dented by the trades.
The bank lost money on bad derivatives trades in its Chief Investment Office, but said the events were isolated to the CIO, and that it has overhauled the group.
JPMorgan's overall net income was $4.96 billion, or $1.21 a share, compared with $5.43 billion, or $1.27 a share, a year earlier.
JPMorgan Chase and Wells Fargo however reported strong growth in their mortgage lending businesses.
The growth allied with lower loan losses, offered signs of improvement in the U.S. economy.
The banking giants cited increases in mortgage drawdowns and a strong pipeline of applications.
This was spurred they say, by low interest rates and a government program intended to spur refinancing.
Wells, the largest U.S. mortgage lender, and JPMorgan, the largest U.S. bank, also said write-offs for bad loans declined.
Demand for new debt, ranging from auto loans to commercial loans, increased.
The mortgage business, however, was a particularly bright spot for both banks.
Results for both periods included special items. The derivative loss after taxes reduced earnings per share by 69 cents, the company said.
The bank's chief executive Jamie Dimon said the bank had closed the division of the bank responsible for the bad trade and moved the remainder of the trading position under its investment banking division.
Just three months ago, JPMorgan was viewed as the top American bank, guided by Dimon's steady hand. Since the disclosure of the trading loss, however, that reputation has been eroded.
Dimon, who originally dismissed concerns about the bank's trading as a "tempest in a teapot," appeared before US Congress twice to apologise and explain himself, and several government agencies have launched investigations.
JPMorgan has lost about 15% of its in market value since the loss came to light.
The bank could take back pay from executives in charge of the division where the losses occurred. That procedure is known as a "clawback." It would be the first time JPMorgan exercised such a procedure.
The most likely candidate would be Ina Drew, JPMorgan's chief investment officer, who oversaw the division responsible for the loss and left the bank days after the disclosure. In 2011, her pay package totaled $15m.
The Wall Street Journal said today that three other employees of the bank tied to the trade, including one who was known as the "London whale," had left the bank.
Under close questioning from US lawmakers in June about his own role in setting up the investment division responsible for the mess, Dimon declared: "We made a mistake. I'm absolutely responsible. The buck stops with me."
The trading loss has raised concerns that the biggest banks still pose risks to the US financial system, less than four years after the financial crisis erupted in the fall of 2008.
