Bank of America's results surpassed analysts' expectations. But like other banking companies, it is still stuggling with fallout from the recession, taking a hefty $13.4 billion provision for credit losses.
The bank's stock fell $1.32, or 12.5 percent, to $9.28 as the overall stock market slid. Although Wall Street was happy last week with better-than-expected results from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., banking companies generally benefited during the quarter from unusually strong bond trading, a trend not expected to continue while loan problems persist.
Charlotte, N.C.-based Bank of America earned $2.81 billion after paying preferred dividends, or 44 cents per share, compared with a profit of $1.02 billion, 23 cents per share, in the year ago period. Analysts surveyed by Thomson Reuters expected profit of 4 cents per share.
Chief Executive Ken Lewis has been up against intense pressure this year over the Merrill purchase, which closed Jan. 1. Shareholders approved the deal before learning of big losses at the New York-based investment and reports surfaced that Merrill Chief Executive John Thain rushed out billions of dollars in bonuses to Merrill employees in his final days as CEO even as Bank of America was begging the government for aid to complete the deal.
The first quarter results include revenue from the company's acquisitions of Merrill and Countrywide Financial Corp., which Bank of America did not own last year.
During the quarter, revenue more than doubled to $35.76 billion, mainly from the addition of Merrill. Analysts expected revenue of $27.13 billion.
However, Bank of America recorded a $13.4 billion provision for credit losses in the first quarter, showing that it is not immune from deteriorating credit quality and growing unemployment. The bank set aside $6.4 billion as additional reserves to cover future losses.
"We understand that we continue to face extremely difficult challenges," Lewis said in a statement.
Bank of America has received $45 billion in government funds as part of the Treasury Department's $700 billion financial rescue package.