Shares in Bank of America surged today after the lender surprised the market with second-quarter profits that fell less than had been expected.

Bank of America stock rose by 11 per cent in early New York trading, while the Dow Jones industrial average rose 31.7 points to 11,520.2.

Bank of America said net income fell 41 per cent to $3.41 billion (£1.7 billion), or 72 cents a share, from $5.76 billion, or $1.28 cents, last year.

Last week, both JP Morgan Chase and Citigroup delivered results above analysts' forecasts, despite posting huge writedowns on assets linked to sub-prime mortgages. However, Merrill Lynch shocked investors with higher-than-expected write-offs.

Bank of America said its purchase on July 1 of Countrywide Financial, once the nation's largest mortgage lender, will add to profits but result in deeper cost cuts than previously estimated.

Kenneth Lewis, chief executive at Bank of America, described the result as "solid in a difficult financial environment”. He said results were strong in all the bank's businesses that were not tied to real estate.

Analysts said the results suggested that the credit crisis may not be as bad as some in the market had feared.

"A week ago there was tremendous fear about systematic risk to the system. There’s definitely a floor here,” said Steve Roukis, managing director at Matrix Asset Advisors in New York.

The results included $212 million of merger and restructuring costs. Net revenue increased 4 per cent to $20.32 billion. The results excluded a $2.33 billion loss at Countrywide, acquired the day after the quarter ended that reflected just under $4 billion of credit-related losses.

Bank of America expects the $2.5 billion merger to add to profit in 2008, after earlier saying it would not affect earnings per share for the year. It also said it significantly increased estimated cost savings from an original $670 million.

Citigroup, the largest US bank, on Friday posted a narrower-than-expected $2.5 billion quarterly loss. JPMorgan and Wells Fargo, the third and fifth-largest banks, said profits fell by 53 per cent and 23 per cent, respectively.

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