Bank of America Corp. said Monday its profit fell 41 percent in the second quarter, hurt by a big increase in bad debts tied to falling home prices and a slowing economy.
But its results easily beat Wall Street estimates.
The Charlotte, North Carolina-based bank reported net income of $3.41 billion, or 72 cents per share, on $20.32 billion in revenue, in the April-June period. That compared with net income of $5.76 billion, or $1.28 per share, on $19.63 billion in revenue a year earlier.
Analysts on average expected a profit of 53 cents per share on $18.37 billion in revenue.
The nation’s second-largest bank by assets said credit quality continued to weaken during the quarter, particularly in markets that experienced the most significant home price declines.
Bank of America more than tripled the amount it set aside for bad loans to $5.83 billion, up from $1.81 billion a year ago, largely for consumer and commercial portfolios directly tied to the housing market, including home equity, residential mortgages and homebuilding. The figure surged to $6.01 billion in the first quarter.
Net charge-offs, loans it doesn’t think are collectable, jumped to $3.62 billion, up from $1.5 billion a year ago, reflecting housing market deterioration and slowing economic conditions, the company said.
Write-downs tied to disrupted capital markets totaled $1.22 billion, down from the first quarter’s $2.81 billion.
Profit in consumer and small business banking fell 66 percent to $812 million. The corporate and investment bank saw profit rise 3 percent to $1.75 billion. In wealth and investment management, profit fell 1 percent to $573 million.
“We are pleased with these solid results in a difficult financial environment,” said Chief Executive Officer Kenneth D. Lewis in a statement. “Outside of real estate-related products, our operating results were quite good virtually across all business segments.”
Bank of America completed its $2.5 billion purchase of Countrywide Financial Corp. on July 1, a deal it now says will add to its profits this year.
Second-quarter results included $212 million of merger and restructuring costs.
Countrywide, whose results weren’t part of Bank of America’s figures, posted a second-quarter net loss of $2.33 billion, including just under $4 billion in credit-related losses.
Bank of America has said it plans to cut about 7,500 jobs as it integrates the company into its own operations. The job cuts amount to about 12.5 percent of the combined companies’ mortgage, home equity and insurance businesses.
The cuts will take place over the next two years in locations across the country “in instances where the two companies have significant overlap,” the bank said last month.
Four of the nation’s five biggest banks have now reported better-than-estimated results, sparking a rally in financial shares last week.
Among other companies, JPMorgan Chase & Co. and Wells Fargo & Co. reported smaller-than-expected profit declines, while Citigroup Inc. had a milder-than-expected $2.5 billion loss.