BofA Profit Slides, But Beats Expectations

BofA estimates it will restructure $40 billion in home loans over the next two years.

Consumer credit quality continues to deteriorate, particularly in BofA's home equity portfolio and to a lesser extent in its residential mortgage and other unsecured consumer loan portfolio. "Credit quality will continue to be an issue in the second half of 2008," he said.

"Most of our businesses are performing very well even with the state of the economy and the problems in housing. We believe our revenue streams are sustainable," Lewis said. "However as I said we are not in denial. Credit losses are still going up, but given what we see today, they are manageable."

Still Lewis did not seem to forewarn against losses in its prime mortgage portfolio, as JPMorgan Chase (JPM Quote) CEO Jamie Dimon suggested last week.

Jeff Harte, an analyst at Sandler O'Neill & Partners said that BofA's credit quality deterioration was "worse than expected, but not extremely so." It does not suggest that BofA is "seeing as rapid a rate of deterioration as indicated by JPM last week," he wrote in a note.

In its investment banking arm, BofA took writedowns totaling $1.22 billion -- approximately $645 million of the writedown was related to collateralized debt obligations, down from a $1.47 billion writedown on the complex securities in the first quarter, it said.

BofA's beat joins better-than-expected results last week from Citigroup(C Quote), JPMorgan Chase and Wells Fargo(WFC Quote). Those results contributed to a 3.4% jump in the Dow Jones Industrial Average last week.