BofA shares surge despite investment banking loss

Bank of America shares surged almost 6% on the opening bell on Wall Street after the bank posted net income of $2bn for the fourth quarter of 2011, despite its investment banking arm booking a loss.

Shares in the bank climbed 5.7% to $7.19 in early trading on the New York Stock Exchange as revenues beat analysts’ expectations.

BofA posted earnings per share for the quarter of 15 cents, against a loss of 16 cents the previous year, while revenues rose 11% to $25.1bn.

Its tier one capital ratio reached 9.86% at the end of December, up from 8.65% at the end of September and higher than the 9.25% minimum the bank had projected.

Loan growth from traditional banking outpaced the investment bank where, like JPMorgan Chase and Goldman Sachs, BofA suffered sharp revenue declines. Like Citigroup, its investment bank posted a loss.

Meanwhile BofA said it is considering issuing $1bn of common stock to employees next month in lieu of their end of year cash bonuses.

BofA, whose stock was the laggard last year in a dismal sector, has struggled to escape from toxic mortgage losses and litigation, largely the result of its disastrous acquisition of mortgage issuer Countrywide at the height of the crisis, the FT reports.

Despite its troubles, the bank has attracted at least one high profile backer – veteran investor Warren Buffett ploughed $5bn into the stock towards the end of last year, labelling the firm a "strong, well-led company."

Earlier this week US investment banking giant Citigroup saw its shares tumble in early afternoon trading after the group revealed a fall in profits and sliding revenues.

Citigroup's fourth quarter net income totalled $1.2bn, or 38 cents per share, down 7.7% from a year ago. Revenue fell 6.5% from a year earlier, to $17.2bn.

Goldman Sachs reported a 58% drop in net income for the fourth quarter of 2011 but its shares opened higher as the figures beat analyst expectations.

JP Morgan Chase also disappointed with a 23% drop in its profits for the fourth quarter, reported on Friday.