BofA Sinks Despite Profit Beat

Updated from 2:09 p.m. EDT

Bank of America ( BAC) proved on Monday that it didn't merely return to profitability last quarter -- it soared.

However, when one-time items, preferred dividend payments and unusual gains are stripped out of the whopping $4.2 billion profit BofA reported, the picture becomes significantly bleaker.

On a conference call, BofA executives predicted a few more quarters of strained credit conditions before the economy starts to improve -- a forecast that doesn't bode well for core banking operations. And investors began to realize that booming profits reported of late by financial powerhouses, which sparked a major market rally, may not be hardy enough to sustain it.

Bank of America shares plunged 24.3% to $8.02 at the close Monday, its low for the day. The firm was among the biggest drags for the market, along with other financial stocks like Citigroup ( C), Wells Fargo ( WFC) and JPMorgan Chase ( JPM). The Dow Jones Industrial Average closed down 3.6%.

BofA blew away Wall Street expectations on Monday, reporting a first-quarter profit attributable to common shareholders of $2.8 billion, or 44 cents per share. The figure was 11 times the average analyst estimate of 4 cents per share, according to Thomson Reuters.

Excluding preferred dividend payments, the Charlotte, N.C.-based company would have earned $4.2 billion. During the same period a year ago, BofA posted a $1.2 billion profit, or 23 cents per share.

BofA's results benefitted from its two huge acquisitions of Merrill Lynch and Countrywide, as well as major mark-ups on assets due to an easing of fair-value accounting standards. BofA reported a $2.2 billion positive adjustment to Merrill's troubled assets, as well as a $1.5 billion pretax gain on other debt securities. The firm also posted a $1.9 billion gain on its sale of holdings in China Construction Bank.

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