Bank of America posted lower earnings on Friday and Citibank relied on a one-off gain to turn a profit, following strong showings from their peers which have driven stocks higher. Bank of America Corp's second-quarter net income Net income fell 5.5 percent to $3.22 billion, or 33 cents per diluted share, from $3.41 billion, or 72 cents, a year earlier, the Charlotte, North Carolina-based bank said on Friday in a statement. “Difficult challenges lie ahead from continued weakness in the global economy, rising unemployment and deteriorating credit quality that will affect our performance for the rest of the year and into 2010,” Chief Executive Kenneth Lewis said. Bank of America's report follows better-than-expected results from JPMorgan Chase & Co. and Goldman Sachs Group Inc. this week. While competitors repaid US rescue funds and freed themselves of extra US scrutiny, Lewis must repair relations with regulators after clashes over the bank's pursuit of Merrill Lynch & Co. and demands that he raise $33.9 billion in capital. “We have to get through the next few quarters,” Lewis said on a conference call. “Profitability in the second half will be much tougher,” he said, citing more loan losses and the anticipated absence of one-time gains that boosted results so far this year. Profit in global banking rose 74 percent to $2.49 billion at Bank of America, aided by a gain from selling the merchant processing business into a joint venture. Earnings at the unit that includes trading of bonds, equities and currencies more than quadrupled to $1.38 billion on improved credit markets. The home loan and insurance unit lost $725 million, even as revenue tripled, on credit costs and expenses to help homeowners modify their loans. The bank sees signs that some loan losses may abate, with late payments flattening and home prices stabilizing in California's hardest hit markets, Lewis said. Card services swung to a loss, and the new federal law curbing interest rates and fees may slice revenue, the bank said. The provision for credit losses, money set aside to cushion against bad debts, was $13.38 billion, the same as the previous quarter. Assets no longer collecting interest rose to $30.98 billion from $25.6 billion on March 31 and debts the bank doesn't expect to be repaid jumped 25 percent to $8.7 billion. The credit-card unit's $1.62 billion loss compared with a $582 million profit last year. New regulations approved by Congress may trim revenue from cards by as much as $700 million in 2010, Lewis said. However, Citibank, the No.3 US bank which struggled to survive the financial crisis, reported a $4.3 billion second-quarter profit, thanks to the merger of its brokerage arm into a new venture. But the results were boosted largely by a $6.7 billion after-tax gain related to the completion of its sale of a majority of its Smith Barney wealth management division to Morgan Stanley. On a per share basis, the company said it earned 49 cents a share. Analysts were expecting the New York City-based bank to record a loss of $1.07 billion, or 37 cents a share. Citigroup CEO Vikram Pandit Citigroup has earned a reputation as one of the nation's most troubled financial institutions. From the time the credit markets began to unravel in late 2007 up until the end of last year, the company lost more than $28 billion. The bank's problems subsequently led the government to take a $45 billion stake in Citigroup in the form of preferred shares and warrants to help stabilize the bank. Outside the banking sector General Electric, America's largest conglomerate, said second-quarter profit tumbled 49 percent as the recession continued to hurt its finance unit and lowered sales across its wide range of industrial businesses. The Fairfield, Connecticut-based company reported net income was $2.6 billion, or 24 cents per share, after paying preferred dividends. That compared with $5.1 billion, or 51 cents per share, a year earlier. Revenue fell 17 percent to $39.1 billion. GE Capital, which lends money on everything credit cards to commercial real estate, posted a modest profit of $590 million. GE's industrial units have also suffered. GE said its second quarter sales fell 7 percent to $26 billion, a decline led by home appliances, train locomotives and diagnostic equipment for hospitals.
