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Bank of America Net Rises

Shares fall.

Bank of America's

(BAC) - Get Bank of America Corp Report

profit rose 5.4% in the first quarter, fueled by increases in fee income, investment banking and mortgage banking.

During the first three months of this year, the Charlotte, N.C., lender made $5.25 billion, or $1.16 a share, compared with $4.98 billion, or $1.07 a share a year, earlier. Revenue rose 2.3% to $18 billion.

BofA's results just squeezed by analysts' estimates as increased credit costs put a damper on the lender.

"The benefits of doing more business with more customers was somewhat offset on the bottom line by the impact of a flat yield curve and normalizing credit costs," the company says.

The results include pretax merger and restructuring expenses of $111 million, equal to a penny a share, related to its 2006 purchase of credit card giant MBNA. It also includes $397 million, or 6 cents a share, of expenses because of changes in tax laws related to certain equity-based compensation.

Operating earnings in the first quarter totaled $5.33 billion, or $1.17 a share.

Analysts were predicting the $1.5 trillion-asset bank to earn $1.15 a share on $18.5 billion of revenue, according to Thomson Financial.

Loans and leases rose 17% in the quarter to $724 billion. Deposits rose 1.5% to $693 billion.

BofA, with more than 5,700 branches, says net charge-offs rose 74% from the year-earlier period and 0.7% from the fourth quarter to $1.43 billion as a result of "portfolio seasoning" and "the trend towards more normalized levels post bankruptcy reform." But charge-offs were offset by reductions in reserves from consumer credit card securitization activities and the sale of its Argentina loan portfolio, the company says.

Nonperforming assets rose 11% from the fourth quarter and 23% from a year ago to $2.06 billion.

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BofA's investment banking business improved by 35%, driven by debt underwriting and M&A deal volume, the company says.

Earlier this week, Bank of America,

JPMorgan Chase

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and two private equity firms agreed to pay $25 billion for student lender

Sallie Mae

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.

BofA is also putting the finishing touches on its $3.3 billion buy of U.S. Trust, the ultra high-net-worth advisory unit of

Charles Schwab

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. The deal is expected to close in the third quarter.

Shares fell 32 cents to $51.50 in premarket trading.