Bank of America tops estimates, but focus is on credit woes

Bank of America Corp. (BAC) warned of worsening loan default problems Monday even as it posted a first-quarter profit of $2.81 billion.

Although Bank of America said higher revenue from the purchase of Merrill Lynch & Co. helped offset a surge in credit costs, it took a $13.4 billion provision for credit losses during the first three months of the year. The amount of its problem loans more than tripled to $25.7 billion and CEO Ken Lewis said he couldn't predict when the bank's credit morass would end.

The bank's stock fell $2.58, or 24.3 percent, to $8.02 as the overall stock market plunged. Bank of America earned $2.81 billion after paying preferred dividends, or 44 cents per share, compared with a profit of $1.02 billion, 23 cents per share, in the year ago period. Analysts surveyed by Thomson Reuters expected profit of 4 cents per share.

Bank of America, as other banks have done, attributed its profit to trading activities on markets including bonds. But troubled loans, also known as nonperforming assets, increased to $25.7 billion from $7.8 billion a year ago. The bank also lost $1.8 billion on credit card services, after posting a profit a year ago.

"Credit is bad and we believe credit is going to get worse before it will eventually stabilize and improve," Lewis said during a conference call with analysts. "Whether that turn is later this year or in the first half of 2010, I'm not going to hazard a guess."