Bank of America Profit Rises 5.2% On Fees and Gains
Bank of America Corp. said its second-quarter profit rose 5.2%, but the Charlotte, N.C., banking giant is finding it harder to overcome an interest-rate squeeze and higher loan costs, relying instead on fees and big investment gains.</br></br>Like other banks reporting results this week, Bank of America said it is putting aside more money for loans expected to go sour. The bank said its credit quality remains "sound." But it is clear that more borrowers are struggling to make payments as the housing market continues to slump.</br></br>The bank nearly doubled its provision for expected credit losses to $1.81 billion from $1.01 billion a year earlier, citing probable losses in growth areas such as home-equity and small-business lending.</br></br>"Nothing in our credit-quality numbers is a surprise," said Kenneth D. Lewis, the bank's chairman and chief executive, noting that the increased costs are coming off historic lows. He said Bank of America, the nation's second-largest bank by stock-market value after Citigroup Inc., is "well positioned" going into the second half of the year.</br></br>Other banks reporting earnings yesterday also made provisions for worsening credit conditions. SunTrust Banks Inc., Atlanta, the eighth- largest U.S. bank, posted a 25% increase in net income thanks to an after-tax gain of $146 million on the sale of Coca-Cola Co. stock. Net income soared to $681 million, or $1.89 a share, from $544 million, or $1.49 per share, a year earlier. Excluding the gain from the Coke stock, quarterly net income would have fallen as the bank doubled its provision for loan losses to $105 million.