NEW YORK (Dow Jones)--It wasn't that long ago that Bank of America Corp. (BAC) Chief Executive Kenneth Lewis was contemplating calling off his acquisition of Merrill Lynch.
He was probably glad on Monday that the deal went through after all. The brokerage unit helped drive first-quarter profit of $4.2 billion, as $3.7 billion of that was linked to the brokerage bought in January.
That's likely music to Lewis' ears after broad criticism on Wall Street that BofA had inherited massive problems when it agreed to buy Merrill, a similar complaint he heard after buying lender Countrywide Financial. Just weeks after the deal closed, it had been revealed that Merrill incurred losses of more than $15 billion during the fourth quarter.
"It is interesting that the two businesses, that is Merrill Lynch and Countrywide, that garnered the most press, provided a significant contribution to revenue and earnings growth," Lewis said during a conference call with analysts..
Certainly, a strong performance from Merrill Lynch was expected. Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) already posted strong capital markets results.
BofA also joined the other banks in booking gains stemming from steep declines in the value of their own debt. This treatment of some Merrill structured notes delivered $2.2 billion in gains to Bank of America.
The accounting rule is known as a credit-value adjustment, which is kind of the flip side of mark-to-market rules that hurt bank earnings when their investments fell in value. The adjustment boosts earnings because liabilities have declined.
The addition of Merrill Lynch also helped boost BofA in closely watched league tables, Lewis said. Though industrywide deal volumes were down for the quarter, he said, the combined company ranked No. 1 in equity, high-yield leverage and syndicated loans by volume. The bank was also a top-five merger and acquisitions adviser in the U.S. and globally, he said.
Revenue at Bank of America's global markets unit rose to $4.6 billion during the quarter due to strong advisory and capital markets income. The majority of that increase was directly attributable to Merrill's influence, according to the bank.
Jason Goldberg, an analyst with Barclays Capital, said that certainly the first quarter was a "much improved environment" for all the banks. That is especially true considering Merrill Lynch, as a stand-alone company, posted the worst loss in its 96-year history during the fourth quarter.