Bank of America may finally be returning to health.
The bank, which is often considered a bellwether for the American economy, said Friday morning that it clawed back to profitability in the first quarter after two consecutive periods of losses.
It had been battered over the last year by huge losses in consumer loans and a costly merger with Merrill Lynch that sank its share price.
Surprisingly, perhaps, profit from Merrill Lynch, the bank’s much-maligned brokerage firm, has helped to offset continued losses from consumer loans, though those losses also narrowed.
For the first three months, Bank of America reported net income of $3.2 billion, or 28 cents a share.
Total revenue was $32 billion, down 11 percent from $35.7 billion. Analysts polled by Thomson Reuters had expected revenue of $27.97 billion and 9 cents a share. Income attributed to common shareholders was $2.8 billion.
That compared with a loss of $194 million in the last quarter of 2009 and $1 billion in the quarter before that. For the year-ago quarter, strong trading results and favorable accounting adjustments led to a profit of $4.2 billion or 44 cents a share.
“With each day that passes, the 2010 story appears to be one of continuing credit recovery, and our results reflect a gradually improving economy,” the chief executive, Brian T. Moynihan, said in a statement.
Bank of America was the second major bank to report results this week; on Wednesday, JPMorgan Chase announced first-quarter profit of $3.3 billion, more than analysts had expected.
But where JPMorgan Chase had weathered the financial downturn better than most, Bank of America was once considered critically ill, requiring $45 billion in government bailout money. Bank of America paid back the government money last year.
As the nation’s largest lender with branches from coast to coast, Bank of America’s continued recovery could offer a further glimmer of hope for the broader economy, after positive data in recent weeks on jobs and consumer spending.
“The consumer credit cycle seems to be clearing up, pointing towards recovery mode,” said Anthony J. Polini, an analyst at Raymond James & Associates. The stock market certainly thinks so: bank shares have enjoyed a nine-week rally, he noted.
Bank of America’s stock closed up eight cents on Thursday at $19.48, the highest price for the shares since November 2008.
While the Merrill Lynch deal has been derided as an expensive dud, Merrill’s contributions to the bank’s bottom line are now reshaping views of the merger.
Profit from the global banking and markets units, which includes the Merrill Lynch investment banking operations, rose $709 million, to $3.2 billion. Revenue increased by $795 million as market conditions improved and write-downs decreased.
“It’s safe to say that the Merrill Lynch deal seems to be paying off sooner rather than later,” Mr. Polini said. Bank of America completed its purchase of Merrill Lynch in January 2009 in a deal valued at $29.1 billion, a price that was criticized as exorbitant.
Mr. Polini said the price was looking better given Bank of America’s earnings progress in the last four quarters, though he said the share price still had not fully recovered.
Bank of America was also helped in the first quarter by an improvement in consumer loans, albeit from horrific numbers. For instance, credit card loans that were at least 30 days late fell in March to 7.07 percent, compared with 7.23 percent the previous month.
The bank wrote off 12.54 percent of credit card balances as uncollectible in March, a brutally high number but nonetheless better than the 13.51 percent it wrote off in February. Losses grew, however, in its home mortgage business.
In the first quarter, the bank put aside $9.8 billion to cover bad loans, down from $10.1 billion in the fourth quarter.
But Richard X. Bove, an analyst at Rochdale Securities, was not so optimistic. On Thursday evening, he said he expected the bank’s credit card and mortgage divisions to remain in bad shape, and its revenues from deposits to be curtailed by new policies curbing revenue from overdraft fees.
While he predicted that earnings would remain inadequate, he said investors might be satisfied with any signs of optimism.
By ANDREW MARTIN
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