Merrill falls to loss despite £3.9bn BofA profit

Bank of America has posted a net $6.2bn (£3.9bn) third-quarter profit after selling assets and re-valuing assets and liabilities, but its investment bank, the former Merrill Lynch, made a loss as dealmaking suffered.

BofA's revenues rose six per cent year on year to $28.7bn, while the net profit signalled a huge turnaround from the $7.3bn loss it made in the third quarter of 2010.

But its global banking and markets unit slumped to a $302m loss, compared with profit of $1.56bn in the previous quarter and $1.47bn a year earlier.

Revenue from investment banking and trading - much of the former Merrill Lynch – fell 36 per cent and 22 per cent, respectively, from the second quarter.

BofA’s headline performance boosted by a pre-tax $3.6bn gain from the sale of its stake in China Construction Bank and two separate gains from revaluing its liabilities and debits.

It booked a $4.5bn pre-tax gain from positive fair value adjustments on structured liabilities, which reflected widening credit spreads, and a $1.7bn pre-tax gain from trading debit valuation adjustments.

It also wrote off $2.2bn from the value of its private equity and other investments, however.

But the accounting gains and asset sales offset a 15 per cent drop in loan income in the latest quarter.

Last year’s loss was also due to a $10.4bn goodwill impairment charge, which skewed the result, it added.

"Our focus this quarter was on strengthening the balance sheet by selling non-core assets and building capital to position the company for future growth," said chief financial officer Bruce Thompson.

"In that regard, we accomplished a great deal. We reduced the size of our balance sheet by $42bn from the second quarter of 2011, nearly doubled our Tier 1 common equity ratio since early 2009, and continued to have strong liquidity levels even after significantly reducing both short- and long-term debt."

BofA, once the biggest bank by assets in the US, slipped to the number two slot, ceding the top spot to JPMorgan Chase.