Bank of America profits from surging financial markets

A return to the good old days on Wall Street pushed Bank of America back into the black with quarterly profits of $2.8bn (£1.8bn).

The company reported today that its traders had cashed in on resurgent financial markets and an improved mood of optimism among investors to rake in billions of dollars of revenue.

Bank of America's profit was a turnaround from a $194m loss in the preceding three months and ended three consecutive quarters in the red. In addition to a revival in investment banking, the firm revealed signs of an improvement on the high street with a return to profit from its credit cards operation and an uptick in consumer spending.

"The worst of the credit cycle is clearly behind us at this point," said chief executive Brian Moynihan.

The North Carolina-based bank set aside $9.8bn to cover delinquent loans during the quarter, though this was sharply lower than a provision of $13.4bn a year ago.

Moynihan said: "As credit costs have declined, you can see the bottom line earnings are coming through and that's what we've all been waiting for."

Although Bank of America's figures beat analysts' forecasts, the firm's shares slipped by nearly 3% in early trading on the New York stock exchange. Bank stocks have been buoyant since JP Morgan produced strong earnings on Wednesday, setting a high threshold for expectations of renewed prosperity.

Bank of America's global banking and markets division, which includes the brokerage Merrill Lynch, turned in profits of $3.2bn, compared to $709m last year. Commercial banking went from a $30m loss to a $713m profit and credit cards delivered a $952m profit, though home loans deteriorated with losses widening from $494m to $2bn.

Anthony Polini, an analyst at stockbroker Raymond James, said: "JP Morgan obviously set the bar high. Bank of America just jumped over it today."

At the height of the financial crisis, Bank of America received $45bn in aid from the US government, partly to soak up losses incurred in a controversial buyout of Merrill Lynch. In common with other big US banks, the firm has since repaid all its bail-out money.