Bank of America, the second-largest US bank this afternoon said quarterly profit fell 77 per cent, hurt by more than $5 billion of write-downs and credit-related costs as more borrowers fell behind on payments.
First-quarter net income fell to $1.21 billion, or 23 cents per share, from $5.26 billion, or $1.16, a year earlier.
Excluding merger costs, profit was 26 cents per share, below the average analyst forecast of 45 cents, according to Reuters Estimates. Results included a $776 million gain from credit card network Visa Inc's initial public offering last month.
Net revenue dropped 6 per cent to $17 billion. Analysts expected revenue of $16.33 billion. Bank of America shares were off 6 cents to $38.50 in pre-market electronic trading.
"These results clearly did not meet our expectations," chief executive Kenneth Lewis said in a statement. "The weakness in the economy and prolonged disruptions in the capital markets took their toll."
Bank of America said it set aside $6.01 billion for credit losses, quintuple the year-earlier level, hurt by credit costs in home equity, small business and homebuilder portfolios.
The bank added $3.29 billion to its reserves for credit losses. Net charge-offs nearly doubled to $2.72 billion and nonperforming assets nearly quadrupled to $7.83 billion.
Results also included $1.31 billion of trading losses, reflecting write-downs of $1.47 billion for collateralized debt obligations and $439 million for loans to fund leveraged buyouts. Trading losses declined from $5.15 billion from the fourth quarter.
The bank's Tier-1 capital ratio, a measure of its ability to cover losses, rose to 7.51 percent from the fourth quarter's 6.87 percent, following a sale of $12.9 billion of preferred stock.