CHARLOTTE, N.C. – Bank of America Corp. said Thursday its second-quarter earnings rose 5 percent, as growth in capital markets activity and consumer fees offset an increase in credit losses.

Like some of its banking rivals, the No. 2 U.S. bank by assets also boosted its provisions for loan losses, an indication that it too sees higher risks from lending.

That aside, Chairman and Chief Executive Officer Kenneth D. Lewis told analysts on a call that “the revenue pick up was quite impressive.”

Net income climbed to $5.76 billion, or $1.28 per share, from $5.48 billion, or $1.19 per share, a year ago.

The Charlotte-based bank’s revenue grew 8 percent to $19.96 billion from $18.52 billion last year.

The results beat analysts expectations, which estimated earnings of $1.20 per share on revenue of $18.58 billion, according to a poll by Thomson Financial.

“We are encouraged by Bank of America’s second quarter results,” wrote Goldman Sachs analyst Lori B. Appelbaum in a research note, which highlighted the bank’s net interest income levels and improved credit card delinquencies. “These have been two major issues for the stock – with now improved visibility.”

Bank of America shares slipped 35 cents to $49.01 in morning trading.

The bank cited revenue increases in its three main business lines: consumer and small business banking, corporate and investment banking and wealth and investment management, as reasons for the quarter’s results.

“Our businesses are doing a good job of attracting new customers and expanding our relationships with existing clients,” Lewis said.

But in the bank’s largest consumer unit, which includes the nation’s biggest credit-card business and bank-branch network, net income dropped 23 percent to $2.46 billion. Bank of America became the biggest U.S. credit card lender when it bough MBNA Corp. last year. Earnings were hurt this quarter by higher managed credit costs, the bank said.

Wealth-management revenue increased 8.4 percent to $2.01 billion, as profits grew 6.4 percent to $619 million. The business will be aided going forward by the company’s $3.3 billion acquisition of U.S. Trust from Charles Schwab Corp. The deal closed earlier this month.

Investment banking revenue rose 26 percent from a year ago and retail product sales added 8 percent.

Fee income rose 17 percent to $11.18 billion from $9.59 billion in the second quarter of 2006, driven by increases in equity investment gains, other income, investment banking and service charges.

Strong originations of first mortgages were boosted by the successful launch of the bank’s No Fee Mortgage Plus program, which accounted for 11 percent of first mortgage production in the quarter.

Bank of America set aside $1.81 billion overall for credit losses, up from $1.24 billion in the first quarter and $1.01 billion in the second quarter of 2006. Net charge-offs, or bad loans, rose to $1.5 billion.

JPMorgan Chase & Co., the nation’s third-largest bank, on Wednesday reported a 20 percent increase in second-quarter profit. The New York-based bank also said it tripled the amount of money it has set aside in case its loans go sour, signaling to investors that lending is getting riskier for the financial sector.

Chief Executive Officer Jamie Dimon, who has led a push to expand overseas, said he’s preparing for a “less favorable environment” in the U.S.

Bank of America’s Lewis, on the other hand, is increasing investments in the U.S. The company plans to spend $21 billion to buy Chicago-based LaSalle Bank Corp., a unit of Netherlands-based ABN Amro North America Holding Co. Lewis said he expects that deal to close in the fourth quarter.

On the Net:

Bank of America Corp.: http://www.bankofamerica.com

A service of the Associated Press(AP)