Updated from 9:08 a.m. EDTBank of America ( BAC), one of the nation's big three banks, on Wednesday reported strong second-quarter earnings, with profits rising a better-than-expected 41% over a year ago. The Charlotte, N.C.-based bank, which recently completed its acquisition of FleetBoston Financial, profited from continued strength in its consumer lending business and strong gains in investment banking. The bank also said it is beginning the process of converting Fleet branches to the BofA brand name. In the quarter, BofA earned $3.85 billion, or $1.86 a share, compared with $2.74 billion, or $1.80 a share, a year earlier. The Thomson First Call estimate had the bank earning $1.74 in the quarter. At midday, shares of BofA were down 15 cents, or 0.2%, to $84.98. Several smaller banks are also scheduled to post earnings today, including Puerto Rico-based Doral Financial ( DRL), an important mortgage lender in the U.S. commonwealth. Citigroup ( C) reports Thursday, and J.P. Morgan ( JPM) reports next Wednesday. Bank of America said total revenue in the period was $13.2 billion, up 34% and a shade under the consensus estimate of $13.3 billion. The bank's results included a pretax charge of $125 million, or 4 cents a share, related to the merger with Fleet. In the quarter, BofA estimated cost savings of $206 million from the merger. "I am particularly pleased that even as we successfully execute on the merger with FleetBoston Financial, our associates continue to grow customer relationships and gain market share in key products throughout our franchise," said Kenneth Lewis, the bank's president and chief executive, in a press release. In a conference call with analysts, BofA Chief Financial Officer Mark Oken says the bank is seeing signs of a revival in commercial borrowing, particularly by midsized businesses. A slow rebound in commercial lending has been one of the more puzzling features of the economic recovery.
Net interest income, the profit generated from the bank's lending operation, totaled $7.6 billion, up 43% from a year ago. The quarterly provision set aside for loan losses remained relatively stable, rising to $789 million from $772 million, in the year-ago period. The bank posted big gains in income from credit cards, securities trading, banking fees and investment banking. The credit card division was the most impressive, with a 52% rise in income to $1.16 billion. The soft side of BofA's business, not surprisingly, was mortgage banking. The rise in interest rates has shutdown the once red-hot market for mortgage refinancing and led to fewer applications for new mortgages. Mortgage banking income fell 46% to $299 million. The bank, meanwhile, posted a big quarterly improvement in gains on the sale of debt securities. In the quarter, those gains were $795 million, compared with $296 million a year ago.