Bank of America has reported a profit of $3.2 billion in the second quarter of this year, down 5.9% from the same period last year but better than analysts had expected.

The profit amounted to 33 cents per share when taking into account dividends paid to the US government for its capital injections. This was better than market expectations of 28 cents per share.

Merger boosts Citigroup Q2

Revenues rose 60% from a year ago to $33.1 billion, lifted in part by the acquisition of Wall Street brokerage Merrill Lynch.

'Difficult challenges lie ahead from continued weakness in the global economy, rising unemployment and deteriorating credit quality that will affect our performance for the rest of the year and into 2010,' chief executive Kenneth Lewis said.

Results included a gain from selling part of its stake in China Construction Bank Corp. Results also included $713m of dividend payments tied to a federal bail-out.

Rival US bank JPMorgan Chase said yesterday that record investment banking fees helped it to achieve a 36% rise in Q2 profit, but it warned that credit quality in consumer mortgages and credit cards was deteriorating faster than it expected.

Some analysts fear that banks' improving performance could be confined to the second quarter when stock markets soared.

Earlier in the week, Goldman Sachs Group said quarterly earnings surged 33%, just nine months after the US Treasury bailed out the nation's largest banks - many crippled with bad debts stemming from a US housing market meltdown - with $125 billion of taxpayer money.