NEW YORK — Bank of America Corp. used a surge in investment banking revenue and a marked improvement in some kinds of troubled loans, such as credit cards and loans to companies, to post $3.2 billion in first-quarter earnings.
The Charlotte bank's impressive investment-banking revenue, mostly from Wall Street activities like bond and stock trading, basically offset the performance of the rest of its businesses, which together lost $36 million during the quarter.
Still, the risk of future losses in Bank of America's loan portfolios — the biggest source of concern for investors — mostly showed improvement during the quarter. Although the bank's home mortgage portfolio continued to show signs of more coming losses, its levels of troubled home equity loans, credit cards and loans to companies all fell.
"With each day that passes, the 2010 story appears to be one of continuing credit recovery, and our results reflect a gradually improving economy," said President and Chief Executive Brian Moynihan.
Bank of America's strong investment-banking results were helped in part by its controversial acquisition of Merrill Lynch & Co., which Bank of America agreed to purchase during the most tumultuous days of the financial crisis.
Shares were up 1% to $19.67 premarket. As of Thursday's close, the stock had risen 88% in the past year.
Big banks are expected to post better earnings results as the improving economy leaves its mark on their performance. Earlier this week, JPMorgan Chase & Co. said its first-quarter profit rose a more-than-expected 55% on a big drop in credit-loss provisions.
Bank of America reported a profit of $3.18 billion, or 28 cents a share, from $4.24 billion, or 44 cents a share, a year earlier. The results included $521 million and $765 million, respectively, in restructuring and merger charges.
Revenue dropped 11% to $31.97 billion.
Bank of America shrunk all but one of its loan portfolios during the quarter. The bank took on an additional $2.9 billion in residential mortgages, but shrunk every other loan portfolio, from credit cards to loans to companies. The bank currently holds $976 billion in total loans and leases, up from $900 billion at the end of the fourth quarter, although the increase was due entirely to some complex accounting rules.
Credit-loss provisions — what the bank sets aside out of earnings for current and future losses on loans — fell to $9.81 billion from $13.38 billion a year earlier and $10.11 billion in the prior quarter, while the net charge-off rate — the proportion of loans actually written off — was 4.44%, compared with 2.85% a year earlier and 3.71% in the prior quarter. Bank of America said charge-offs would have fallen sequentially absent new accounting rules regarding securitized credit-card and other loans and mortgage modifications.
By segment, the company's credit-card business swung to a profit while the mortgage business posted a $2.1 billion loss.
At the global banking and markets business, which includes Merrill Lynch, earnings rose 28% amid record sales-and-trading results.