Bank of America Corp., the second-largest US bank, said yesterday that first-quarter profit rose five per cent, as growth in fee income helped offset a decline in lending margin.

Net income for the Charlotte, North Carolina-based company increased to $5.26 billion, or $1.16 per share, from $4.99 billion, or $1.07, a year earlier.

Revenue on a taxable equivalent basis rose three per cent to $18.42 billion, the bank said. Excluding items, profit totalled $5.33 billion, or $1.17 per share. Analysts on average forecast a profit of $1.15 per share on revenue of $18.48 billion, according to Reuters Estimates.

The earnings change was the weakest since the fourth quarter of 2005, when profit fell two per cent. Bank of America acquired credit card issuer MBNA Corp. at the start of 2006, making comparable results for the last year look better.

Fee income rose 10 per cent, while net interest income fell five per cent, the bank said. The latter resulted from a decline in net interest margin to 2.61 per cent from 2.98 per cent a year earlier, and 2.75 per cent in the fourth quarter.

Profit fell in the bank's three main business lines: Consumer and small business banking, corporate and investment banking and wealth and investment management.

Results benefited from $896 million of equity investment gains, and a $131 million release of credit reserves related to the divestment of some Latin American businesses. Chief executive officer Kenneth Lewis called the quarter "solid, despite a challenging operating environment".

Bank of America shares closed on Wednesday at $51.82 on the New York Stock Exchange. The shares have fallen three per cent this year, while the Philadelphia KBW Bank Index is little changed.