BofA Net Income Rises 11%

Bank of America Corp., the No. 2 U.S. bank, said Wednesday that quarterly profit rose nearly 11% as consumer lending increased, credit card and other fees grew and the company cut bad loans in half.

The Charlotte, N.C.-based bank said first-quarter net income rose to $2.68 billion, or $1.83 a share, from $2.42 billion, or $1.59, a year earlier. Revenue rose 7% to $9.69 billion.

Results included a pretax charge of $285 million, or 16 cents a share, related to the settlement of accusations that Bank of America let favored clients improperly trade mutual fund shares.

They exclude results from FleetBoston Financial Corp., which the bank acquired for about $48 billion on April 1. Fleet earned $773 million in the quarter on revenue of $3.2 billion.

Bank of America said consumer lending rose 20%, and the number of new savings accounts quadrupled and checking accounts nearly doubled.

“Expectations have been pretty low for whether Bank of America could put two big banks together,” said Wayne Bopp, an analyst at Fifth Third Investment Advisors, whose $35 billion of assets include the bank’s shares. “The decent earnings report should calm investor fears.”

Excluding the charge, profit was $1.99 a share. On that basis, analysts polled by Reuters Research on average had forecast profit of $1.79 a share.

Expenses rose 15%, or 9% excluding the charge. Bank of America and Fleet will together pay $515 million and give up $160 million in fees to settle mutual fund probes.

Chief Executive Kenneth Lewis said the Fleet integration was “ahead of schedule.”

The bank now sees as much as $1.375 billion of merger savings, 25% more than planned, by 2006. Bank of America, which has 5,700 banking offices, plans to cut 12,500 jobs, or about 7%, over two years.

The company’s shares fell 41 cents to $80.09 on the New York Stock Exchange.

BofA charged off $106 million of loans and wrote down about $29 million of derivative exposure tied to Parmalat. It said much of its remaining $120 million of exposure was insured. The bank was a lead Parmalat banker before the Italian food company became insolvent.

Consumer and commercial banking profit rose 16% to $1.85 billion, including a 17% increase in credit card income to $795 million.

Corporate and investment banking profit rose 1% to $463 million as revenue fell 2% to $2.27 billion. Asset management profit fell 62% to $53 million.

Among other banks reporting earnings Wednesday, Beverly Hills-based City National Corp., the largest banking concern based in Southern California, said its first-quarter profit rose 17% because of improving loan performance and strong growth in wealth management revenue.

The parent of City National Bank reported quarterly net income of $50.9 million, or $1 a share, up from $43.7 million, or 87 cents, a year earlier.

Net interest income was up 2% from a year earlier, to $134.3 million. Non-interest income, including fees from investment services, jumped 19% to $46.6 million, primarily because of the acquisition of investment manager Convergent Capital in the second quarter of 2003.

City National made no provision for credit losses last quarter, compared with $17.5 million set aside in the first quarter of 2003, and said bad loans and other nonperforming assets shrank from $99.9 million a year earlier to $42.7 million as of March 31. The firm had total loans outstanding of about $7.9 billion in the quarter.

The results were reported after markets closed. In regular trading, City National shares eased 46 cents to $58.09 on the NYSE.