Bank of America Corp, the largest US retail bank, today posted lower but better-than-expected quarterly results, offsetting a surge in bad debts tied to falling home prices and a slowing economy.
While the 41 per cent drop in second-quarter profit was the fourth straight quarterly decline, Bank of America was the latest big US bank to exceed analysts' forecasts.
The bank also said its July 1 acquisition 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 $2.40, or 8.7 per cent, to $29.89 in premarket electronic trading.
Second-quarter net income for the Charlotte, North Carolina-based bank fell to $3.41 billion, or 72 cents per share, from $5.76 billion, or $1.28 per share, a year earlier.
Results included $212 million of merger and restructuring costs. Net revenue increased 4 per cent to $20.32 billion.
Analysts on average had expected profit of 48 cents per share on revenue of $18.26 billion, according to Reuters Estimates.
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.
Write-downs tied to disrupted capital markets totaled $1.22 billion, down from the first quarter's $2.81 billion. Results excluded a $2.33 billion loss at Countrywide - acquired the day after the second quarter ended - which reflected just under $4 billion of credit-related losses.
Bank of America expects the $2.5 billion merger to add to profit in 2008, after previously saying that it would not affect earnings per share for the year. It also said it has significantly increased estimated cost savings from the original $670 million. Bank of America is the nation's second-largest bank by assets, including the Countrywide acquisition.
Among other lenders, JPMorgan Chase and Wells Fargo reported smaller-than-expected second-quarter profit declines, while Citigroup Inc had a milder-than-expected $2.5 billion loss.