Bank of America Corp on Monday reported quarterly profit that fell less than expected, as improved investment banking and trading results offset a surge in bad loans, causing shares of the largest US retail bank and mortgage lender to soar. The 41 percent drop in earnings was the bank's fourth straight quarterly decline, as the bank more than tripled the amount it set aside for bad loans, largely because of falling home prices and a slowing economy. Bank of America nevertheless became the fourth of the nation's five largest banks to top quarterly earnings forecasts, joining Citigroup Inc , JPMorgan Chase & Co and Wells Fargo & Co . The bank also said its July 1 purchase of Countrywide Financial Corp, once the nation's largest mortgage lender, will add to profit faster and result in deeper cost cuts than previously estimated. Bank of America shares rose $2.75, or 10 percent, to $30.24 in morning trading, helping to pull broader US equity markets higher. The shares had bottomed at $18.44 on July 15. “It suggests the credit crisis isn't as bad as people thought” for lenders, said Steve Roukis, managing director at Matrix Asset Advisors Inc in New York, which invests $1.4 billion. “A week ago there was tremendous fear about systematic risk to the system. There's definitely a floor here.” Second-quarter net income for Charlotte, North Carolina-based Bank of America fell to $3.41 billion, or 72 cents per share, from $5.76 billion, or $1.28, a year earlier. Excluding merger costs, profit was 75 cents per share, the bank said. Net revenue increased 4 percent to $20.32 billion. Analysts on average expected profit of 48 cents per share on revenue of $18.26 billion, Reuters Estimates said. Profit nearly tripled from the first quarter's $1.21 billion, as securities write-downs slid more than half to $1.22 billion. Chief Executive Kenneth Lewis said the bank had “solid results in a difficult financial environment,” with good results in virtually all businesses not tied to real estate. Results excluded a $2.33 billion loss at Countrywide, which the bank said reflected about $3.7 billion of credit-related losses and write-downs. Bank of America expects the $2.5 billion merger to add to profit in 2008, after earlier saying it would not affect earnings per share for the year. It also said it now expects $900 million of cost savings by 2011 from integrating Countrywide, up from an original $670 million. The bank had previously set 7,500 job cuts from the combined companies. Bank of America is the nation's second-largest bank by assets, including the Countrywide acquisition. Citigroup, the largest US bank by assets, on Friday posted a milder-than-expected $2.5 billion quarterly loss. JPMorgan and Wells Fargo, the third- and fifth-largest banks, said profit fell a respective 53 percent and 23 percent. Wachovia Corp, the fourth-largest US bank, has said it may post a $2.6 billion to $2.8 billion loss when it reports results on Tuesday. “The key word is improvement,” said Matt McCall, president of Penn Financial Group in Denver. “That's the first step of really forming a bottom in the financials.”
