Bank of America profit drops 6 percent

Bank of America Corp.'s second-quarter profit declined 6 percent, as its gains were offset by high credit costs.

The North Carolina-based bank had $3.2 billion in second-quarter net income, down from $3.4 billion in the same period last year. After deducting $805 million in preferred dividends, including $713 million paid to the U.S. government, earnings per share were 33 cents.

The bank increased its Tier 1 common capital by nearly $40 billion by issuing common stock, exchanging nongovernment preferred stock for common stock and asset sales. The bank's Tier 1 Capital ratio was 11.93 percent at the end of the quarter.

Officials cited strong performance in the wholesale capital markets businesses and in home loans, as well as gains from the bank's sale of China Construction Bank shares and its merchant processing business. Those returns were somewhat offset by high credit costs - including a $4.7 billion addition to the reserve for loan and lease losses - and negative credit valuation adjustments on some liabilities and the effects of a special Federal Deposit Insurance Corp. premium assessment.

The bank's provision for credit losses for the quarter was $13.4 billion, unchanged from the first quarter but up from $5.8 billion in second-quarter 2008. Nonperforming assets were $31 billion, up from $25.6 billion in the first quarter and up from $9.7 billion a year ago.

Compared to the same period last year, net interest income rose 9 percent to $11.9 billion, noninterest income more than doubled to $21.1 billion, and noninterest expense grew 75 percent to $17 billion.

Shares (NYSE: BAC) closed Tuesday at $13.34, compared to a 52-week range of $2.53 to $39.50.