A surge in profits from bond and stock trading propelled Bank of America Corp. (BAC) to $3.2 billion in first-quarter earnings, more than doubling from the fourth quarter of last year.
Bank of America enjoyed a similar surge in its trading business last year’s first quarter, helping the company report overall profits that were nearly identical to Friday’s numbers.
“The company was helped tremendously by trading volumes,” said Jaime Peters, banking analyst at Morningstar. “Is that sustainable? Well probably not.”
Although easily beating estimates, investors were subdued in their response, as the report showed the rest of Bank of America’s businesses lost a combined $36 million during the quarter.
At noon, the bank’s stock was down over 4%, succumbing to broader market issues after rising at the open.
At issue is Bank of America’s conventional banking businesses, which produced a mixed bag of results for investors to chew on.
Their home loan unit lost $2.1 billion dollars and set aside an additional $900 million for losses tied to loans from Countrywide that are performing worse than expected.
This is in addition to the nearly $2 billion BAC had set aside for those loans in the 3rd and 4th quarter of 2009.
And, despite taking on an additional $2.9 billion in residential mortgages, income from originating mortgages fell to $760 million compared with $1.7 billion in last year’s fourth quarter.
“We are addressing those issues and hopefully can correct that over the next few quarters,” Moynihan told investors during a conference call Friday.
On a positive note, their commercial bank and credit card units returned to profitability after posting losses in every quarter last year.
“With each day that passes, the 2010 story appears to be one of continuing credit recovery, and our results reflect a gradually improving economy,” said President and Chief Executive Brian Moynihan.
Overall, the bank set aside $9.8 billion for current and future credit losses – a sharp improvement from last year’s first quarter charge of $13.4 billion.
The bank now holds $36 billion in nonperforming loans, or loans that may soon become uncollectible. BAC currently holds $976 billion in total loans and leases, up from $900 billion at the end of the fourth quarter, although the increase was due entirely to some complex accounting rules.
Actual loan losses in the quarter were 4.44% of all loans, compared with 2.85% a year earlier. The bank said that charge-offs would have fallen sequentially without new accounting rules regarding securitized credit card and other loans and mortgage modifications.
