BofA earnings fall 41% but top expectations

Bank of America Corp.'s earnings in the second quarter dropped 41 percent from a year ago, though the bank topped the estimates of Wall Street analysts.

BofA earned $3.41 billion, or 72 cents per diluted share, in the latest quarter, down from its all-time high of $5.76 billion, or $1.28 per diluted share, in the second quarter of 2007.

On average, analysts polled by Thomson Financial had estimated BofA (NYSE:BAC) would earn 53 cents per share in the latest quarter.

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Net interest income grew to $10.6 billion from nearly $8.4 billion in the second quarter of last year.

Noninterest income fell to nearly $9.7 billion from $11.2 billion in the same period.

Net income in the latest quarter included pretax merger and restructuring costs of $212 million.

"We are pleased with these solid results in a difficult financial environment," bank Chairman and Chief Executive Kenneth Lewis, says in a prepared statement. "Outside of real estate-related products, our operating results were quite good virtually across all business segments.

"This performance demonstrates not only the advantages of our company's diversity and scale, but also the ability of our associates to differentiate Bank of America in the eyes of customers and clients."

BofA says credit quality continued to weaken in the second quarter, particularly in markets that experienced the most significant declines in home prices. In addition, the bank says the slowing economy resulted in credit deterioration concentrated in the domestic consumer, small business and home-builder portfolios.

BofA's provision expense rose to $5.83 billion in the latest quarter, an increase of $4.02 billion from a year ago, reflecting net charge-offs of $3.62 billion and additions to the allowance for loan and lease losses of $2.21 billion. The additions were mainly in consumer and commercial portfolios tied to housing, including home equity, residential mortgage and home builders. The company has added $7.29 billion to the reserve through increased provision over the past 12 months.

The second-quarter results do not include the operations of Calabasas' Countrywide Financial Corp., which Charlotte, N.C.-based BofAbought July 1.