July 6 (Bloomberg) -- Bank of America Corp., the biggest U.S. lender, may report a 10 percent jump in uncollectible loans to $7.6 billion when second-quarter earnings are released this month, Credit Suisse said in a report.

Bad debts included $1.9 billion tied to home equity, and about 10.4 percent of credit-card loans will be written off, analyst Moshe Orenbuch wrote today in the report. The Charlotte, North Carolina-based bank charged off $6.9 billion in the first quarter, he said.

Bank of America, the biggest U.S. lender by assets and deposits, probably had a 32-cent-a-share profit for the quarter, including a $5.2 billion pretax gain from the sale of China Construction Bank Corp. shares, Orenbuch said. Excluding the gain and a $750 million assessment to replenish the Federal Deposit Insurance Corp.’s reserve fund, the bank probably lost 15 cents a share, he wrote.

Chief Executive Officer Kenneth Lewis is under pressure from investors to show losses are under control when the bank reports results on July 17. U.S. stress tests in May predicted the company could face $136 billion in loan losses through 2010 in an extended recession. The bank completed a campaign in June to close the $33.9 billion capital gap identified in the stress tests, the most among 19 lenders examined.

Loan-Loss Levels

Bank of America expects charge-offs to increase for the second and third quarters, though at a lower rate than cited in the stress tests, Chief Financial Officer Joe Price said on a May 7 conference call. The tests assumed charge-offs will average $11.4 billion per quarter through the end of 2010, higher than the bank’s estimates, Bank of America said in a May 7 statement. The company “believes its pre-provision net revenue will significantly exceed the government’s estimate,” according to the statement.

The lender received $45 billion in U.S. funds plus a government guarantee of $118 billion in assets, most tied to its January acquisition of Merrill Lynch & Co.

Improving capital markets are benefiting Bank of America, Orenbuch said, with expected trade-related revenue of $4.5 billion and investment banking fees of $1.2 billion.

Credit Suisse rates Bank of America “neutral” with a 12- month price target of $12. The shares slid 49 cents, or 3.9 percent, to $12.15 at 4:15 p.m. in New York Stock Exchange composite trading, and have declined 14 percent this year.

Orenbuch’s price target is at the low end of analysts surveyed by Bloomberg. The most bullish analyst, Morgan Stanley’s Betsy Graseck, expects the bank to trade at $32 within the next year, according to a May 22 report.

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Last Updated: July 6, 2009 16:44 EDT