JPMorgan Chase & Co. leapfrogged six Wall Street firms, including Morgan Stanley and Goldman Sachs Group Inc., to become the fee-income leader this year in the most lucrative market for merger advice: other banks.

New York-based JPMorgan, the second-biggest American bank with $1.1 trillion of assets, may earn about $131.5 million this year from advising on 28 bank transactions, according to data compiled by Bloomberg. That excludes the industry’s biggest takeover, JPMorgan’s $55 billion purchase of Chicago-based Bank One Corp., for which it paid itself $40 million, regulatory filings show.

President James Dimon, 48, who joined JPMorgan this year in the Bank One acquisition, oversees a mergers department that pursues the banking industry – the busiest for takeovers this year, with 18% of $1.3 trillion of announced deals – by nurturing long-term relationships and exploiting the experience of bankers including Chief Executive Officer William Harrison and mergers chiefs Robert Kindler and Alex Lynch.

“Key senior executives are helping make pitches to clients,” said John Chrin, 41, who leads JPMorgan’s investment banking team in New York that focuses on financial companies. Merger bankers earn their fees by performing valuation studies to determine what a client’s company is worth, identifying and introducing likely buyers and sellers to each other, arranging financing for the deal, and negotiating terms.

JPMorgan is advising on the two biggest transactions of the third quarter: the $30 billion takeover battle for Japan’s UFJ Holdings Inc. and Madrid based Banco Santander Central Hispano SA’s $15 billion proposal to buy London-based Abbey National Plc.