By David Mildenberg Oct. 16 (Bloomberg) -- Bank of America Corp., the biggest U.S. lender, posted its second quarterly loss in less than a year, unable to shake off effects of the economic slump that led to two U.S. bailouts. The $1 billion third-quarter loss, or 26 cents per diluted share, compared with a profit of $1.18 billion, or 15 cents, a year earlier, the Charlotte, North Carolina-based bank said today in a statement. The average estimate of 24 analysts surveyed by Bloomberg was a loss of 12 cents a share. The quarterly report will be the last supervised by Chief Executive Officer Kenneth Lewis, 62, who retires Dec. 31 after regulators and shareholders criticized his pursuit of Merrill Lynch & Co. The bank reported a fourth-quarter loss for 2008, its first in 17 years, and Lewis is trying to lead a rebound while fending off state and federal probes of the Merrill deal. He agreed yesterday to give up his 2009 salary and bonus. “Although rising credit costs and legal woes remain issues, we believe that all eyes are waiting for an update on the CEO succession plan,” Barclays Capital analyst Jason Goldberg said in an Oct. 13 report. Results were aided by profit from Merrill Lynch, including trading on bonds, stocks and currencies. The bank lost money on and home lending and credit cards. The bank added $11.7 billion to its reserve for future loan losses, the statement said. Recession’s Impact Bank of America’s status as the largest U.S. consumer lender has hurt results since the recession began in December 2007. While Federal Reserve Chairman Ben S. Bernanke has said the economy may be growing again, the jobless rate rose to 9.8 percent in September, and Lewis said last month that “a near double-digit unemployment rate is bad medicine for a bank that serves consumers.” JPMorgan Chase & Co., the second-biggest U.S. bank by assets, said this week that third-quarter profit climbed almost sevenfold to $3.59 billion. Goldman Sachs Group Inc. said its income more than doubled to $3.19 billion. Both New York banks repaid their U.S. bailout funds. Citigroup Inc., the third-biggest U.S. bank, posted a $101 million profit yesterday as Chief Executive Officer Vikram Pandit said he wants to repay $45 billion in U.S. bailout funds as soon as possible. Bank of America also owes $45 billion. Bank of America shares have rebounded five-fold since February when they traded at less than $3, their lowest in more than 20 years, on concern that the U.S. would seize a stake in the company. The stock closed at $18.10 yesterday in New York Stock Exchange composite trading. Accounting Rules The bank, largest in the U.S. by deposits and assets, was hampered during the quarter by accounting rules that require the lender to assess the value of its own $447 billion in debt each quarter. Falling prices entitle the bank to take gains, on the theory that the debt could be bought back and retired for less money, while rallies that boost the price lead to charges that reduce reported earnings. Bank of America also earmarked $402 million to settle a dispute over a plan to share losses with the Treasury Department on $118 billion of loans and mortgage-backed securities, mostly acquired in the Merrill transaction. Lewis has said the purchases of Merrill on Jan. 1 and home lender Countrywide Financial Corp. in July 2008 during the worst of the credit crunch bore fruit during the first part of this year, providing most of the company’s earnings growth. Bank of America expects to add to its 20.5 percent share of U.S. home lending over the next five years, Barbara Desoer, president of home loans and insurance, said in an Oct. 14 interview. “It has become hard to imagine Bank of America without Merrill Lynch,” Lewis told employees in a September memo announcing his departure. To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

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