Profit drops 77 percent for Bank of America

Bank of America says it remains concerned about the health of the consumer.

CHARLOTTE, N.C. (AP) — Bank of America Corp. said Monday its profit fell 77 percent in the first quarter, hurt by trading losses and a $3.3 billion increase in reserves for problem loans.

The Charlotte-based bank, set to acquire troubled subprime mortgage lender Countrywide Financial Corp. later this year, reported earnings of $1.21 billion, or 23 cents per share, on $17 billion in revenue.

That compared with net income of $5.26 billion, or $1.16 a share, a year earlier on $18.16 billion in revenue.

Analysts on average expected a profit of 41 cents per share on revenue of $16.5 billion, according to Thomson Financial.

The bank’s shares dropped 95 cents to $37.61.

Major national banks such as Bank of America continue to be besieged on two sides: The bread-and-butter banking business is struggling because of the slumping housing market. With home prices flagging, more people and real estate developers are failing to repay their loans.

The credit crisis is also hobbling the value of many bank investments.

Last week, crosstown rival Wachovia Corp. said it lost $393 million in the first quarter because of bad credit and tumultuous financial markets.

Washington Mutual Inc. lost $1.1 billion.

Wells Fargo Co.’s profit fell 11 percent, JPMorgan Chase Co.’s profit slid 50 percent, and Citigroup Inc. posted a loss of $5.1 billion.

Bank of America’s chief executive, Ken Lewis, said in a statement that the first-quarter results “clearly did not meet our expectations.”

Results included $1.31 billion of trading losses compared with income of $1.66 billion a year earlier. This was driven primarily by $1.47 billion in write-downs of collateralized debt obligations, a security often backed by subprime mortgage loans, and $439 million for loans to fund leveraged buyouts. Trading losses were $5.15 billion in the fourth quarter of 2007.

Bank of America said the $3.3 billion increase in reserves was part of a $4.78 billion increase in provisions, to $6.01 billion, “due to rising credit costs — particularly in the home equity, small business and homebuilder portfolios.”

Net charge-offs, loans it doesn’t think are collectible, jumped to $2.72 billion, up from $1.43 billion a year ago, reflecting housing market deterioration and slowing economic conditions, the company said.

Bank of America said it “remains concerned” about the health of the consumer.

In the bank’s consumer unit, which includes the nation’s biggest credit card business and retail branch network, revenue rose 17 percent, while earnings dropped 59 percent due to increased credit costs.

Investment-banking profit plunged 92 percent on the write-downs as revenue fell 41 percent.

Results also included a $776 million gain from credit card network Visa Inc.’s initial public offering last month.