Bank of America's earnings fall 32%

NEW YORK (CNNMoney.com) -- Bank of America reported disappointing third-quarter results Thursday, as this summer's market meltdown resulted in a big hit within the company's investment banking business.

The Charlotte, N.C.-based bank said net income fell 32 percent to $3.70 billion, or 82 cents a share, for the three months ended Sept. 30, from $5.42 billion, or $1.18 a share, a year earlier.

After remaining silent for weeks about how badly it was hurt by this summer's market turmoil, Bank of America revealed its earnings tumbled 32 percent during the third quarter.

That fell short of estimates of $1.06 a share, according to analysts polled by Thomson Financial.

The company also reported a bigger-than-expected decline in revenue, down 12 percent to $16.3 billion from $18.49 billion in the same period in 2006.

Analysts were anticipating the company would report results of $18.3 billion.

Bank of America (Charts, Fortune 500) shares lost nearly 4 percent in midday trading on the New York Stock Exchange.

Bank of America's Chairman and CEO Kenneth Lewis said he was "disappointed" in the company's performance during the quarter, blaming it on its global corporate and investment banking business, which saw its earnings decline $1.33 billion, or 93 percent.

Included in the $1.33 billion total was a $247 million writedown on leveraged loans and $607 million in trading losses.

"At the end of the day, trading is volatile and it was a bad trading environment," said Jeff Harte, a financial services analyst with Sandler O'Neill & Partners.

Lewis conceded during a conference call with analysts that a third of those trading losses were due to this summer's difficult market conditions, while the remaining two thirds to "mistakes we made in judgment."

As a result of those losses, Bank of America, considered the nation's second-largest bank based on assets behind Citigroup, said it may scale back on its investment banking division going forward after trying to build it up in recent years.

"Never say never, but I've had all the fun I can stand in investment banking," said Lewis. "To get bigger is not something I really want to do."

Across its other businesses, Bank America revealed that while its results were impacted, it did show some signs of strength.

Its closely-watched consumer and small business banking division saw a decline in profits, although the company reported stabilizing credit card losses and an uptick in the number of new checking accounts.

The bank's wealth management unit reported higher net income and revenue, helped by its acquisition of U.S. Trust, which it completed in July.

The company set aside an additional $865 million for credit losses because of continued weakness in the housing market and said that its nonperforming assets, which include loans that have gone bad, climbed to $3.37 billion from $2.39 in the previous quarter.

At the same time, Bank of America said its loan portfolio which includes home equity, commercial and small business loans, remained in good shape.

Bank of America is the latest bank to deliver bad earnings news. Earlier this week, Washington Mutual (Charts, Fortune 500) and Citigroup (Charts, Fortune 500) reported big declines in profits, hurt by their exposure to the subprime mortgage market, tighter credit conditions and the resulting market turmoil. J.P. Morgan Chase (Charts, Fortune 500) bucked the trend by reporting a profit increase, even though its investment banking business suffered.

Bank of America' earnings follow an announcement made earlier this week by a group of big banks including Bank of America, which said they plan to launch a rescue fund that would buy debt from so-called structured investment vehicles, or SIVs, to help prevent a fire sale of the assets.