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NEW YORK (Trefis) -- Bank of America (BAC) - Get Free Report reported one of its better quarterly performances since the economic recession of 2008, with second-quarter earnings of just under $2.5 billion for the period.

An improving credit environment combined with the bank's focused efforts on cutting down costs helped offset lower revenue from the overall slowdown in global markets the last three months.

Investors, however, raised the red flag yet again over the bank's troubled mortgage portfolio, leading to a decline of more than 11% in Bank of America's share price within days of its earnings announcement.

We stick to our

$10 price estimate for Bank of America's stock, a figure nearly 40% above its current market price.

The overwhelming pessimism among investors toward banking stocks in the wake of a deteriorating European debt situation is largely responsible for this price parity besides the uncertainty regarding the quality of Bank of America's huge mortgage portfolio. (See our full analysis for Bank of America's stock


Mortgage Business Still Losing Money

Bank of America's consumer real estate business woes are still long from over, with the unit reporting a pre-tax loss of $1.2 billion for the quarter. This is still notably better than the $1.7 billion pre-tax loss last quarter and the colossal $21.4 billion loss for the second quarter of 2011 when the bank booked a $8.5 billion mortgage settlement.

Bank of America's mortgage business has been reporting in the red each quarter since 2008, a situation made worse by its acquisition of Countrywide following the economic recession.

A comforting trend with the business though is the steady decline in mortgage-related loss provisions. The provisions dropped to under $200 million for in the second quarter from $500 million in the first quarter of this year and about $1 billion in the fourth quarter of 2011.

Project BAC on Right Track

Late last year, Bank of America kicked-off Project BAC -- a two-phased multi-year plan -- to completely revamp its business model and implement large-scale job cuts to rein in costs. The plan outlined a reduction in nearly 30,000 jobs, of which an estimated 12,000 have already been trimmed.

The fact that Bank of America's non-interest expenses have been on the decline over the last two quarters without a negative impact on revenue figures is indicative of the effectiveness of the cost-cutting measures. The bank's quarterly non-interest expenses fell to just above $17 billion from $19.1 billion in the first quarter and almost $23 billion in the second quarter of 2011.



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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.