Better credit brings BAML out of the red

BANK OF AMERICA Merrill Lynch came out of the red last year, posting profits of $1.4bn compared to a loss of $2.2bn in 2010.

The bank was boosted by a large improvement in the credit quality of loans in its cards business and rising investment bank profits.

But in a sign that the US banking behemoth is still suffering the fallout of a vast portfolio of toxic property loans, pre-tax losses in its consumer real estate division surged from $13bn in 2010 to $29.5bn last year.

BoA ML’s investment bank saw its full year pre-tax profits fall from $10.6bn in 2010 to $5.7bn, but stayed well out of the red, unlike some rivals.

On a quarterly basis, it posted a bottom-line loss of $433m for the latter part of last year, but that was due to an accounting vagary based on the value of its debt.

In fact, the investment bank made a net profit of $41m in the fourth quarter on revenues of $1.9bn – down by $565m during the same period the previous year. In stark contrast to rivals, it made returns of eight per cent.

The investment bank also boosted its revenues across both its equities and fixed income, currency and commodities (FICC) division at the end of last year, unlike competitors.

Excluding the accounting adjustment, equities brought in $640m in the fourth quarter, while FICC generated $1.2bn in revenues. That compares to negative revenues for both divisions previously.

Its quarterly investment banking fees revenue also came out of negative territory, rising to $1bn.

The bank has also generated more capital, in part by selling of assets such as its stake in China Construction Bank. Its tier one common equity ratio rose to 9.9 per cent versus 8.6 per cent the end of 2010.