NEW YORK (Reuters) – Bank of America Corp on Monday disappointed investors by reporting a big increase in troubled loans, even as its purchase of Merrill Lynch & Co helped first-quarter profit more than double.
While results topped analysts’ forecasts, they were bolstered by one-time events, including a $1.9 billion gain from selling shares of China Construction Bank Corp and $2.2 billion of gains tied to widening credit spreads. Nonperforming assets, meanwhile, totaled $25.74 billion, up 41 percent from year-end.
Shares of Bank of America fell 5.7 percent to $10.00 in premarket trading.
The results are unlikely to stem calls for Chief Executive Kenneth Lewis to be ousted or to give up the post of chairman of the largest U.S. bank, which has taken $45 billion of federal bailout money.
“I don’t see anything that makes me think all of a sudden people are going to take the pressure off Lewis,” said Walter Todd, a portfolio manager at Greenwood Capital Associates LLC, which invests $650 million and owns Bank of America shares. “The biggest question I have is, what is going on with these nonperforming assets?”
Net income applicable to common shareholders of Charlotte, North Carolina-based Bank of America rose to $2.81 billion, or 44 cents per share, from $1.02 billion, or 23 cents, a year earlier. Net revenue more than doubled to $35.76 billion.
Excluding items, profit was 17 cents per share, according to Reuters Estimates, compared with analysts’ average forecast of 4 cents.
Before the impact of preferred stock dividends, net income more than tripled to $4.25 billion from $1.21 billion.
Lewis faces intense pressure over the Merrill purchase, which shareholders approved before learning of big losses at Merrill that would prompt a government bailout.
Bank of America has also infuriated regulators over its handling of $3.62 billion of bonuses awarded to Merrill workers, and the bank’s share price has fallen by more than two-thirds since the merger was announced in September.
The bank also faces a slew of investor lawsuits over its purchases of Merrill and the mortgage lender Countrywide Financial Corp.
Credit quality deteriorated broadly as the economy weakened, housing prices fell and unemployment rose.
Bank of America set aside $13.38 billion for credit losses in the quarter, up from the fourth quarter’s $8.54 billion. Net charge-offs totaled $6.94 billion.
The bank’s credit card business lost $1.77 billion in the quarter as the rate of managed credit card net losses rose to 8.62 percent from 7.16 percent at year-end.
“We continue to face extremely difficult challenges, primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment,” Lewis said.
NMortgage and home equity loan production rose 79 percent from the fourth quarter to $89.26 billion. But this suggests a loss of market share to Wells Fargo & Co despite the acquisition of Countrywide. Wells Fargo reported more than $100 billion of mortgage loans in the first quarter.
Profit in the investment bank totaled $2.37 billion, compared with a year-earlier $991 million loss, fueled primarily by $4.92 billion of trading profits. Wealth management profit more than doubled to $510 million.
Lewis previously said Bank of America was profitable in January and February, causing analysts to boost their forecasts. In the October-to-December period Bank of America had its first quarterly loss in 17 years.
Bank of America shares closed Friday at $10.60 on the New York Stock Exchange. Through Friday, the shares had fallen 24.7 percent this year, compared with a 16.1 percent decline in the KBW Bank Index.
(Reporting by Jonathan Stempel and Elinor Comlay; Additional reporting by Dan Wilchins; Editing by Derek Caney and John Wallace)