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New York: Bank of America Corp, the second-largest US bank, on Monday said first-quarter profit fell 77 per cent, hurt by trading losses and a $3.3 billion increase in reserves for credit problems.
Net income for the Charlotte, North Carolina-based company fell to $1.21 billion, or 23 cents per share, from $5.26 billion, or $1.16, a year earlier. Net revenue dropped six per cent to $17 billion, the bank said.
Analysts on average expected a profit of 45 cents per share on revenue of $16.33 billion, according to Reuters Estimates.
Results included $170 million of merger and restructuring charges and a $776 million gain from credit card network Visa Inc's initial public offering last month.
Bank of America shares were off 36 cents to $38.20 in pre-market electronic trading.
"These results clearly did not meet our expectations," Chief Executive Kenneth Lewis said in a statement. "The weakness in the economy and prolonged disruptions in the capital markets took their toll."
Results included $1.31 billion of trading losses. This reflected write-downs of $1.47 billion related to collateralised debt obligations and $439 million for loans to fund leveraged buyouts. Trading losses declined from $5.15 billion from the fourth quarter.
Bank of America also said it set aside $6.01 billion for credit losses, quintuple the year-earlier level, hurt by credit costs in home equity, small business and homebuilder portfolios.
The bank's Tier-1 capital ratio, a measure of its ability to cover losses, rose to 7.51 per cent from the fourth quarter's 6.87 per cent, following a sale of $12.9 billion of preferred stock.
Through Friday, Bank of America shares had fallen 7 per cent this year compared with an 8 per cent drop in the Philadelphia KBW Bank Index.
Bank of America joined Citigroup Inc, JPMorgan Chase & Co, Wachovia Corp and other banks in reporting losses related to leveraged loans, mortgages, consumer credit or a combination.
The bank, however, generates more of its business in the United States, exposing it more to weak economic conditions at home. Lewis said he expects US gross domestic product growth to be "minimal at best" this quarter, with a slight pickup in the second half of 2008.
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