Bank of America posted better-than-expected quarterly profits on April 19 totalling 5.26 billion dollars, gaining a fresh edge over arch-rival Citigroup which has seen its profits ebb in past months.
Bank of America has expanded aggressively in recent years, swallowing FleetBoston Financial and the MBNA credit card firm, and its profits eclipsed Citigroup's latest quarterly earnings for the second straight time.
"Bank of America is off to a solid start in 2007 despite a challenging operating environment," said the bank's chairman and chief executive Kenneth Lewis.
Excluding certain costs, Bank of America reported first quarter earnings per share of 1.17 dollars, besting the forecasts of most Wall Street analysts who had predicted earnings of 1.15 dollars per share.
The ascendant banking group, which is also expanding its global footprint, unveiled quarterly revenues of 18.42 billion dollars, a shade below market expectations.
The North Carolina-based bank failed to overshadow Citigroup's dominance on the revenue front, however, as its New York-based rival-booked record quarterly revenues on April 16 of 25 billion dollars.
Both banking powerhouses are racing to dominate the US market, the world's largest economy, in a hotly contested battle that is being tracked closely by investors and industry analysts.
Citigroup is boosting its branch network across the country and currently has 3,488 banking centers, but it's still trailing Bank of America which operates a giant network of 5,737 branches across America tapping tens of millions of consumers.
Analysts at Morningstar, an independent research firm, said in a recent note that Bank of America's retail operations account for about half of its profits.
"The bank is adopting scorched-earth tactics by rolling out products like zero-fee mortgages with no private mortgage insurance and free stock trades for checking customers who meet certain requirements," the Morningstar analysts wrote in a note issued before Bank of America released its latest earnings.
Bank of America's five percent profit gain for the period was mainly generated by improved investment banking, mortgage banking and trading and fee gains. Some analysts expressed caution over the bank's results, however, amid a slowing economy.
"With its consumer concentration, Bank of America felt the effects of the flat yield curve and higher credit costs," said Patrick O'Hare, an analyst at Briefing.com.
"While the bank's overall growth was nothing to write home about, there wasn't anything truly alarming about the report," O'Hare said. The banking heavyweight also reported swelling growth in customer-controlled brokerage assets following its decision late last year to offer online share trades for free to qualified customers who dabble in their own share trading.
It said such assets had soared 35 percent in the period to March 31, totalling 28 billion dollars. So called "day traders," both professional and amateur, represent a potentially lucrative client base which Bank of America hopes it can tap to generate income from other services.
Bank of America is also vying to grow its overseas income and announced its latest earnings days after unveiling plans to set up a new credit card joint venture in fast-growing China with China Construction Bank, the nation's third largest lender.
The US bank, headed by Lewis since 2001, holds a nine percent stake in the Chinese firm. Bank of America's shares were down 85 cents at 50.97 dollars in midday trade.