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Bank of America stunned Wall Street today with first-quarter profits hugely ahead of anyone's expectations.
But the bank, which bought Merrill Lynch and Countrywide Financial last year for $30 billion (£20.5 billion) as well as taking a $45 billion toxic asset bailout from the US government, also announced much higher bad loan writedowns.
The profits added to the belief that America's banking crisis may be ending more quickly than expected but will not be enough to relieve pressure from chairman and chief executive Ken Lewis, who has been widely criticised for allowing huge bonuses to be paid to Merrill staff and then seeing many of the key players defect to rival firms.
“The fact that we were able to post strong, positive net income for the quarter is extremely welcome news,” said Lewis. “However, we continue to face extremely difficult challenges.”
BoA said that it had earnings of 44 cents a share, up from 23 cents in the first quarter of 2008 and more than 10 times the average forecast from Wall Street analysts. It said it had net profits of $4.2 billion which is more than it made in the whole of 2008. Of this $3 billion came from Merrill Lynch.
But soaring bad debts saw the bank's provisions for credit losses jump from $8.5 billion at the end of December to $13.4 billion by the end of March.
