Bank of America , said Thursday its first-quarter earnings rose 5%, helped by growth in fee income despite a challenging credit environment.
Net income at the No. 2 U.S. bank by assets climbed to $5.26 billion, or $1.16 a share, from $4.99 billion, or $1.07 a share, a year ago.
Excluding merger and restructuring charges of $111 million, or a 1 cent a share, the company earned $5.33 billion, or $1.17 a share, in the latest quarter.
The Charlotte-based bank's revenue grew 3% to $18.42 billion from $17.94 billion last year.
Analysts estimated earnings of $1.15 a share on revenue of $18.45 billion, according to a poll by Thomson Financial.
Bank of America shares fell 58 cents to $51.24 in morning trading on the New York Stock Exchange.
The bank cited increases in service fee income, investment banking income, mortgage banking income and equity investment gains as reasons for the quarter's improved results.
But the bank also acknowledged weakening credit conditions, saying: "The benefits of doing more business with more customers was somewhat offset on the bottom line by the impact of a flat yield curve and normalizing credit costs."
The flat yield curve, which has reduced the spread between what banks pay to borrow money and what they can earn when they lend it, has been cutting into profits at a number of the nation's banks. And rising interest rates have begun making it harder for some consumers to repay loans, including credit cards and mortgages.
Analysts at Friedman, Billings, Ramsey & Co. said that "the earnings were not high quality," which probably spooked investors. And, they said, the margin compression "has substantial forward earnings implications." Still, they continued their "outperform" rating on the stock.
Profit fell in the bank's three main business lines: consumer and small business banking, corporate and investment banking, and wealth and investment management.
Net income from consumer and small business banking fell 1% to $2.7 billion in the first quarter, while profit from corporate and investment banking was off 5% at $1.45 billion, and earnings in the wealth and investment management fell 2% to $531 million.
Investment banking revenue increased 35%, mirroring strength reported this week at Citigroup, the nation's largest financial institution, and JPMorgan Chase, the third-largest bank. Both banks are in New York.
In the first quarter, Bank of America's managed loan losses, which include loans that it holds and those that it packages into securities to sell, rose to $2.57 billion from $1.48 billion a year earlier.
The bank's 2006 acquisition of credit card issuer MBNA continued to show positive results. Increases in card income and service charges were offset by higher managed credit costs, the bank said.
Bank of America set aside $1.24 billion in the quarter to pay for credit losses, compared with $1.27 billion in the first quarter of 2006.