BofA back in the black — thanks to a boost from Merrill

Bank of America Corp., the largest U.S. lender, posted its first profit in three quarters as the company reaped gains from Merrill Lynch & Co.’s investment banking and provisions for loan losses declined.

First-quarter net income was $3.18 billion, or 28 cents a share, compared with $4.25 billion, or 44 cents, in the same period a year earlier, according to a statement today from the Charlotte, North Carolina-based bank. That beat the average estimate of 23 analysts surveyed by Bloomberg of 10 cents, adjusted for one-time items.

Revenue from Merrill Lynch’s corporate customers and retail investors is helping Chief Executive Officer Brian T. Moynihan keep the bank profitable while he tries to stem losses from home loans. Bank of America bought Merrill Lynch last year in a deal criticized by lawmakers, regulators and investors over its cost, the U.S. bailout that followed and concern that the bank would be saddled with write-offs.

“It would be a surprise if Merrill didn’t add to the earnings,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., before results were released. “The institutional business is way up and there’s a lot more deal-making going on this year than last year, so the numbers look pretty good.” His firm manages more than $75 billion and owns Bank of America stock.

Moynihan, 50, has said he’s focused on curtailing bad loans and simplifying consumer accounts and fees. The provision for credit losses dropped by $3.6 billion, according to the bank. He’s also trying to repair relations with Congress and regulators, which frayed during the months before the December retirement of his predecessor, Kenneth D. Lewis.

New consumer banking regulations will trim Bank of America’s annual revenue from service charges to about $2 billion per quarter starting in the fourth quarter this year, the bank said. That revenue has averaged more than $2.6 billion per quarter over the past year, the bank said.

“We’ve seen the view of commercial companies in America get more confident,” Moynihan said in a CNBC interview. “I expect we’ll see better loan demand, but right now it’s not very strong.”

Bank of America ranks first in the U.S. by deposits and assets, and second among credit-card lenders. Overdue card loans fell in March to the lowest in more than a year, signaling that write-offs may decline from 2009’s record.

The bank’s card services business swung to a $952 million profit from a $1.75 billion loss. The provision for credit costs on unpaid card debts dropped by more than half to $3.54 billion. Home loans and insurance reported a $2.07 billion loss as fewer borrowers refinanced their homes and defaults increased. It was the only one of Bank of America’s six operating units to report a loss during the quarter.

At Merrill Lynch, the company has sought to head off defections of top producers and rehired executives who left. The bank has said it’s spurring growth outside the U.S. by adding more than a dozen corporate bankers in Hong Kong, London and Singapore this year and more staff in emerging-market nations.

Revenue from fixed-income, currency and commodity trading climbed 16 percent to $5.52 billion, the most since the bank acquired Merrill Lynch last year. The segment’s revenue exceeded JPMorgan Chase & Co.’s $5.46 billion in fixed-income revenue for the quarter, which was a record for that bank.

Bank of America stock is trading at its highest price since the Merrill purchase, closing yesterday at $19.48 on the New York Stock Exchange. The shares soared sixfold from March 2009 when analysts were speculating about nationalization.

JPMorgan, the lender’s biggest rival, reported earlier this week that first-quarter profit topped analysts’ estimates on record fixed-income trading and declining provisions for credit losses. Citigroup Inc. and Wells Fargo & Co. report results next week.

“The mega-cap banks will continue to offer very positive results,” said Jack Ablin, chief investment officer at Chicago- based Harris Private Bank, who oversees $55 billion. “Most of Bank of America’s business is skewed to the consumer and because consumer balance sheets are improving they should deliver good results.”