) --

Bank of America's

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second-quarter results drove home the fact that big banks are going to have a very difficult time growing their business in the coming years.

Broadly speaking, the Charlotte, N.C.-based titan earned less money and brought in less revenue than it did the previous quarter -- a rough patch that may only get worse.

Profits in four of its six business lines declined, while the home loans division continued to lose money. Management commented extensively on how much the business of banking has changed and how difficult the current operating environment is.

"The economy and the consumer at the present time are still deleverring so core revenue growth is difficult," CFO Charles Noski said on a conference call.

Even more worrisome was the impact of regulatory reform on future results, with particular concern over the Durbin interchange amendment, which will limit fees that banks charge to merchants for processing debt- and credit-card purchases. Bank of America estimates that new rules will chip away about $5 billion a year from consumer-banking revenue by the end of 2011. More troubling was its expectation of writing down its credit-card business by $7 billion to $10 billion because of how much the reform bill has hurt its value.

CEO Brian Moynihan said his management team was working to mitigate the impact of the reform bill -- in other words, charging fees elsewhere -- but warned that "normalized" earnings could be a ways off.

"This is going to be in my mind a one, two, three year type of work," said Moynihan, later adding, "it's not an overnight thing."

Bank of America shares reflected the strong headwinds the firm faces, trading down 7.2% to $14.28 in recent trades. Volume of 130 million compared to the issue's three-month trailing daily average of 187 million.

Bank of America's report is important because, as the biggest bank in the country with a diverse line of operations, it serves as a useful indicator for how the broader financial-services industry is doing and how the reform bill will impact the industry. From B of A -- as well as

JPMorgan Chase

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, which also reported this week -- investors can glean clues about what may come from

Wells Fargo

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Goldman Sachs

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Morgan Stanley

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and smaller regional banks whose reports are coming down the pike.

Moynihan said the firm is exerting "a ton of effort and expense" to work through problem mortgages via short sales, foreclosures and outright liquidations. He also noted that while losses from the worst loans have declined, demand from strongest borrowers in corporate America remains "muted" because companies are hesitant to expand.

Meanwhile, investment banking profits were down 71% and wealth management earnings fell 24%. Moynihan said this was partly because the markets were so volatile that senior managers thought "it was best to get out of the way."

Of course, it's hardly useful for investors to look at what happened last quarter without considering the future.

Bank of America's report indicates that it's safe to assume loan problems will continue to calm down, but harder to believe that demand will step up. Furthermore, the fee revenue that Bank of America used to rely on from credit cards and debit cards has been cut by federal regulations. This quarter showed that shifting the fee focus to wealth management will be unstable at best.

As far as other capital markets businesses go, even if things get less volatile -- an unlikely proposition -- banks will be constrained in their activities as a result of the Dodd-Frank bill that finally passed through Congress on Thursday.

More on Bank of America Cramer: Thoughts on BofA

Furthermore, Bank of America sold an array of assets during the quarter, including stakes in

Itaú Unibanco

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, and


( STD), as well as private-equity funds and an asset management business within a subsidiary. Part of this was done to meet federal regulatory requirements in repaying bailout funds, and part of it was done to get rid of items that Moynihan has deemed noncore to the new Bank of America going forward in the post-crisis, finreg-limited world.

Bulls looking for positivity in Bank of America's results could find a few scraps, though.

Corporate lending has gotten better and B of A-Merrill Lynch is trying hard to boost its reputation as a powerhouse Wall Street firm - two points that JPMorgan alluded to when reporting results on Thursday as well. Furthermore, funding costs remain incredibly low; it's just a question of how banks will be able to grow profits and revenue using those funds going forward.

Overall, Moynihan called the results a "tale of two cities": Things are getting less bad but without any certainty of when or how they will actually get better.

-- Written by Lauren Tara LaCapra in New York


Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.