The bank's profits of $0.44 a share, which outpaced analysts' expectations and marked an improvement over profits of $0.23 a share during the first quarter last year, was attributed to increases in home refinancing and trading.
But the bank also warned of worsening loan default problems even as it posted a first-quarter profit of $2.81 billion. Investors concerned about the banking industry's health sent financial stocks and the overall market sharply lower.
Chairman and CEO Kenneth D. Lewis, who has been under pressure to show results after a string of acquisitions, said in late February that Bank of America's purchases of Merrill Lynch & Co. and Countrywide Financial Corp. were "the two stars" driving profit.
"The fact that we were able to post strong, positive net income for the quarter is extremely welcome news in this environment," Lewis said in a statement released Monday. " It shows the power of our diversified business model as well as the ability of our associates to execute."
The bank's stock fell $2.58, or 24.3 percent, to $8.02 as the overall stock market plunged. Last week Wall Street was happy with better-than-expected results from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., but investors appear to have been reevaluating that initial response
Citigroup, JP Morgan Chase & Co., and Goldman Sachs all surprised Wall Street and reported first-quarter earnings that exceeded expectations. Citigroup posted its first profit since 2007, and the earnings of all three institutions combined topped $5 billion.
"Like it or not, capital markets is now a core business for Bank of America, and that has more volatile returns than other businesses," Celent banking analyst Bart Narter told the Associated Press. "Bank of America is no longer exclusively a retail bank and there can be more fluctuations."
Earlier in the day, reactions from banking analysts were most positive.
"There is a question about sustainability, but it's clearly a good sign for the sector," Gary Townsend, chief executive officer of Hill-Townsend Capital LLC told Bloomberg News.
Wells Fargo, the No. 4 U.S. lender, will report its first-quarter earnings Wednesday, and it has hinted that its figures will be well above earlier estimates.
The new round of earnings reports comes as the Treasury Department prepares to announce results of the banking industry "stress tests," which will examine if banks are adequately prepared to withstand further financial jitters. The tests are part of a revamped plan to handle the government's financial sector bailout.
