Bank of America lending profit down, expenses rise

The bank also slipped to No. 2 among U.S. bank ranked by assets, ceding the top spot to JPMorgan Chase & Co. Bank of America shares fell 3 percent in premarket trading.

The accounting gains and asset sales offset a 15 percent drop in loan income in the latest quarter.

"The headline numbers are dramatically different than reality," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel. "I think it would have been flat at best without the adjustments. Revenue was particularly weak.

Bank of America said net income for shareholders was $5.9 billion, or 56 cents a share, in the third quarter, compared with a loss of $7.6 billion, or 77 cents per share, a year earlier, when it took a $10.4 billion accounting charge.

It recorded $9.8 billion in pretax benefits from the sale of China Construction Bank shares and two accounting gains. It took a pretax loss of $2.2 billion related to private equity and "strategic investments."

Net interest income -- or what the bank makes on loan interest -- fell to $10.7 billion from $12.7 billion a year earlier.

The bank's net interest margin -- what it makes in loan interest versus what it pays for deposits -- shrank to 2.32 percent from 2.72 percent. Major banks like JPMorgan and Wells Fargo & Co also posted shrinking lending margins for the third quarter.

Overall, Bank of America's total revenue increased 6 percent to $28.7 billion.

For Bank of America, the drop in loan income was paired with an increase in expenses, which the bank has begun to rein in.

Noninterest expense climbed 4.7 percent to $17.6 billion.

BofA shares were down 3.3 percent at $5.83 in premarket trading.

(Reporting by Rick Rothacker and Joe Rauch in Charlotte, North Carolina; Editing by Derek Caney and John Wallace)