July 12 (Reuters) - JPMorgan Chase ( JPM ) reported a

25% rise in second-quarter profit on Friday, buoyed by rising

investment banking fees and an accounting gain of about $8

billion from a share exchange deal with Visa.

Wall Street banks have benefited from a resurgence in

capital-raising activity in debt and equity markets. They are

also seeing an uptick in fee income from advising on M&A deals

as companies become more confident in the U.S. economy's ability

to avoid a major downturn.

"While market valuations and credit spreads seem to reflect

a rather benign economic outlook, we continue to be vigilant

about potential tail risks," CEO Jamie Dimon said, adding that

the risks included a changing geopolitical situation, which

remains the most dangerous since World War II.

Inflation and interest rates may stay higher than market

expectations due to threats like large fiscal deficits and

restructuring of trade, Dimon said.

The largest U.S. bank's profit was $18.15 billion, or $6.12

per share, for the three months ended June 30, compared with

$14.47 billion, or $4.75 per share, a year earlier, it said on

Friday.

The bank's shares dipped 0.6% in trading before the bell.

They have gained 22% so far this year, but have underperformed

rivals Bank of America, Citigroup and Wells Fargo

.

JPMorgan ( JPM ) benefited from a plan to exchange some of its

shares in Visa, the world's largest payment network.

Investment banking fees grew 50%, compared with a low

base, but was higher than an earlier company prediction of 25%

to 30%.

JPMorgan's ( JPM ) lending business also benefited from high rates,

with net interest income (NII) - the difference between what it

earns on loans and pays out on deposits - rising 4% to $22.9

billion.

Lending has remained healthy even as banks compete for

deposits and face pressure to shell out more to depositors to

store their money.