Bank of America Doesn't Impress

Bank of America (NYSE: BAC) had a so-so quarter, which was slightly disappointing compared to the outperformance of big banking competitors Citigroup (NYSE: C  ) , Wachovia (NYSE: WB  ) , and JP Morgan (NYSE: JPM  ) . The company's supporters believe Bank of America has wisely diversified its businesses to tap growth and create synergies. Meanwhile, critics think that the company has engaged in empire-building via share-diluting acquisitions. Given the first quarter's results, it seems the debate will go on.

For the quarter, earnings per share excluding merger charges increased 8% over last year to $1.17. On the bright side, noninterest income rose 10%, helped by strong showings in debit cards, investment and brokerage services, investment banking, and wealth management. On the other hand, net interest income fell 6%, partially because of a shift to higher cost deposits thanks to the competitive deposit environment.

For the most part, credit quality was stable, with no major red flags in the main ratios. Net charge-offs in the residential mortgage portfolio were for the most part negligible. Although management had previously remarked that its proprietary trading desks would take a hard look at subprime loans if the price was right, the company so far hasn't made any sizable inroads into this area.

As we saw at American Express (NYSE: AXP  ) and Capital One (NYSE: COF  ) , credit card losses rose due to tougher comparisons against 2006's levels, which was expected given the 2005 bankruptcy legislation. Management expects card losses to peak in the second quarter and improve in the second half of the year. We'll have to stay tuned to figure out how well Bank of America can make the pieces it has assembled fit together -- especially given that 2007 is the second year after the MBNA acquisition.

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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.