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Bank Stocks, ETFs May Still Be Prosperous

By Kevin Grewal, Editorial Director at

NEW YORK ( TheStreet) -- Despite the Securities and Exchange Commission's allegations of fraud at Goldman Sachs (GS), taxpayer infusions that propped up U.S banks in 2008 and 2009 may have paved the path to prosperity for some of the nation's largest financial institutions.

In the first quarter of the year, the nation's largest bank by assets, Bank of America (BAC - Get Report), boasted a $3.2 billion profit and returned to profitability for the first time in three quarters. A big part of this profitability was driven through strong investment banking numbers and operations inherited in its acquisition of securities firm Merrill Lynch. In fact, the operations inherited from Merrill accounted for more than half of Bank of America's profit and 30% of its revenue, primarily from its fixed-income trading.

To further bolster Bank of America's appeal, five of its six business units were profitable during the first quarter and consumer credit delinquencies seem to be on the mend. Among credit-card users, the number of loans at least 30 days late declined, enabling the financial institution's credit-card unit, once the institution's largest loser, to earn $952 million during the quarter.

As for the future, Bank of America is focusing on growth in Asia and Europe as well as utilizing relationships between Merrill Lynch's talented array of financial advisers and Bank of America's corporate bankers to boost revenue. Additionally, the bank is contemplating revamping its consumer pricing model, with the possibility of including a maintenance fee for certain accounts to soften the revenue blow that is expected to result from eliminating overdraft fees and other traditional charges.

Bank of America is up 22.3% year-to-date and closed at $18.41 on Friday.

Another financial institution that generated healthy profitability in the first quarter was JPMorgan Chase (JPM - Get Report). The financial institution reported net income of $3.3 billion for the quarter with strong performances from its investment banking and fixed-income trading arms.

Solid results were also seen in asset management, commercial banking and retail banking. Much similar to Bank of America, JPMorgan witnessed improvements in consumer credit delinquencies and resulted in a reserve reduction of $1 billion.
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