Hopes that the worst of the credit crunch may be past for the banking industry in the United States rose again yesterday as Bank of America became the fourth leading bank in four business days to report second-quarter results that were better than expected.

Shares in Bank of America, which had jumped by 48 per cent in the final three days of last week amid hopes that the industry may have turned a corner, closed up a further 4 per cent at $28.56.

The group’s 41 per cent decline in second-quarter profits was much better than the consensus analyst forecast.

Bank of America reported a $3.41 billion (£1.7 billion) profit for the second quarter, representing $0.74-a-share, as credit loss provisions more than trebled to $5.83 billion. This was nearly three times the $1.21 billion profit that the group reported in the first quarter and easily outstripped the $0.54-a-share analyst estimate. Revenues rose by 3.5 per cent to $20.3 billion.

Steve Roukis, managing director at Matrix Asset Advisors in New York, said: “It suggests the credit crisis isn’t as bad as people thought. A week ago, there was a tremendous fear about systematic risk to the system. There’s definitely a floor here.”

Kenneth Lewis, Bank of America’s chief executive, said that the bank had achieved solid results in a difficult financial environment.

The group cheered its investors further by saying that Countrywide, the mortgage lender that it bought recently, would add to its profit this year and that the cost savings from the deal would be “significantly” more than the $670 million projected in January, at about $900 million annually by 2011. In January the bank said that it expected Countrywide’s impact on earnings would be neutral.

Bank of America’s results continued what has been a good second-quarter earnings season for the banks. On Wednesday, Wells Fargo reported a 22 per cent decline in its second-quarter profits to $1.75 billion, news that sent its shares up by 33 per cent on the day because it was much better than had been expected and was accompanied by a 10 per cent dividend rise.

JPMorgan cheered the market on Thursday when it announced a better-than-expected 52 per cent decline in its second-quarter profits to $2 billion. On Friday, Citigroup’s shares jumped by 11 per cent after the financial services giant reported a $2.5 billion second-quarter loss that, again, came in ahead of expectations.

The only financial services group to disappoint recently is Merrill Lynch, which on Thursday night shocked investors with a second-quarter loss of $4.6 billion, larger than expected.

Bank of America’s results excluded a $2.33 billion loss at Countrywide, which the bank said reflected about $3.7 billion of credit-related losses and writedowns.

Bank of America’s consumer banking division reported a 66 per cent decline in its second-quarter profit, to $812 million. The corporate and investment banking division reported a 3.2 per cent decrease in profits to $1.75 billion over the same period.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts