Jan. 23 (Bloomberg) -- Bank of America Corp., the second- largest U.S. bank, said fourth-quarter earnings climbed 47 percent as its acquisition of MBNA Corp. led to a surge in credit-card fees.

Net income rose to $5.26 billion, or $1.16 a share, from a restated $3.57 billion, or 88 cents, a year earlier, the Charlotte, North Carolina-based company said today in a statement. Excluding merger and restructuring costs, profit was $1.19 a share, exceeding the $1.18 average estimate of 20 analysts surveyed by Bloomberg.

Bank of America's $34.2 billion takeover of MBNA more than doubled credit-card revenue last year, helping push 2006 earnings to an all-time high of $21.1 billion. Chief Executive Officer Kenneth Lewis exceeded the bank's projections for cost savings from MBNA by cutting almost 6,000 jobs. Shares of the company fell on concern loan losses will mount this year and gains from equity investments won't be repeated.

``It's a deal that's worked very well for them,'' said Joseph Dickerson, a London-based analyst at Atlantic Equities LLP, who has a ``neutral'' rating on Bank of America. ``The savings have been a big lift for the stock.''

Gains the bank realized from investing in other companies surged to $1.07 billion from $521 million a year earlier. UBS Securities analyst Matthew O'Connor estimated that ``higher than normal'' venture capital profit added 3 cents to 4 cents a share. The bank forecast reduced equity investment gains in the ``short-term'' in a slide presentation on its Web site today.

Shares Decline

``Investors may question the sustainability of the company's strong performance in equity investment gains,'' Credit Suisse Group analyst Christopher Mutascio wrote in a research note. He also pointed to a $200 million, or 12 percent, increase in the bank's non-performing loans from the third quarter as evidence of ``higher credit costs.''

The company's shares fell 33 cents, or 0.6 percent, to $53.32 in New York Stock Exchange composite trading. The stock, which declined 1.8 percent in 2005, gained 16 percent last year, buoyed by the cost savings from the MBNA acquisition.

Bank of America's earnings grew faster than Citigroup Inc., its bigger U.S. competitor, whose fourth-quarter profit rose 3.2 percent, the lowest among the largest U.S. financial-services companies.

Bank of America wrested $1.25 billion in cost savings from MBNA in its first year with the bank, the amount it estimated to save within two years, Chief Financial Officer Joe Price said in an interview. The $450 million in savings realized in the fourth quarter is ``the right level going forward,'' he said.

Consumer Banking

``Everybody was nervous about MBNA because of the integration and earnings dilution, but Bank of America has proven time and time again they're good at integrating businesses,'' said Chris Hagedorn, a money manager at Fifth Third Asset Management in Cincinnati, which oversees $21 billion.

Net income at the consumer and small business banking unit gained 44 percent to $2.53 billion on the MBNA acquisition. The business accounted for more than half of the company's $18.8 billion in total revenue for the fourth quarter. Bank of America said it's targeting earnings growth of 6 percent to 9 percent at the unit.

Card services revenue surged to $5.46 billion from $2.25 billion, and would have gained 15 percent had MBNA been a part of the bank a year earlier.

Bankruptcy Filings

The addition of MBNA's higher-interest credit-card loans helped Bank of America fight an industrywide contraction in lending margins. Its net interest margin, the difference between what it earns from loans and pays on deposits, fell to 2.75 percent from 2.82 percent a year earlier. It was 2.73 percent in the prior three months.

Earnings also improved from a year earlier, when a spurt of bankruptcy filings caused the bank's earnings to unexpectedly fall. Americans rushed to file for protection ahead of a new federal law that made it tougher to expunge debt. Bankruptcies fell 76 percent in the most recent quarter, according to data compiled by Lundquist Consulting Inc.

The pullback in bankruptcies helped the bank lower its net charge-offs in the quarter to $1.42 billion from $1.65 billion a year earlier. The company set aside $1.57 billion for future credit losses, up from $1.17 billion in the prior three months.

Wealth Management

Profit at Bank of America's corporate and investment bank rose 23 percent to $1.57 billion as revenue rose 9 percent. Investment banking income rose to $756 million from $547 million as fees from debt underwriting jumped 41 percent. Bank of America doubled its bond underwriting to $37.8 billion in the quarter, according to data compiled by Bloomberg.

The bank also got a $165 million boost from the sale of its Asia Commercial Banking unit during the quarter.

Earnings at Bank of America's wealth and investment- management subsidiary declined 1 percent to $602 million. The company agreed to buy U.S. Trust, the private-banking arm of Charles Schwab Corp., in November for $3.3 billion in cash to compete for wealthy clients against New York-based Citigroup and JPMorgan Chase & Co.

The company said it's targeting earnings growth of 7 percent to 10 percent for both the investment-banking and wealth-management businesses.

Bank of America had been lobbying state banking associations and legislators to loosen a U.S. regulation that prevents any bank from exceeding a 10 percent share of U.S. deposits through acquisitions. After its purchases of MBNA last year and FleetBoston Financial Corp. in 2004, Bank of America's share of deposits stands at 9 percent, meaning another sizeable bank deal might push it over the cap.

Employees Should `Back Off'

Lewis said on the call that the effort ``sends the wrong signal about what we want to do in this country,'' so he told employees to ``back off.''

``There will be no aggressive action on our part,'' Lewis said when asked if the company would push Congress to increase the ceiling.

Lewis also damped speculation that Bank of America would buy a European bank, telling analysts on the conference call that ``that's not what we're thinking about.''

``We can't ever say never because that would be irresponsible, but I just think that a European acquisition would cause us to have to pause and be more thoughtful because we haven't done that before,'' Lewis said.

Barclays Speculation

Shares of Barclays Plc, the U.K.'s third-biggest bank, rose by the most in six months on Dec. 8 after analysts at Merrill Lynch & Co. said Bank of America may be ``very interested'' in buying the London-based company. Lewis last month cited several obstacles to a European acquisition, including stricter labor laws.

In October, Bank of America adopted a plan to ``permanently reduce'' its securities portfolio by at least $100 billion over the next few years, in part to reduce ``noise'' from gains on such holdings from quarter to quarter. The company restated earnings for the past four years in February to correct improper accounting for derivatives.

To contact the reporter on this story: Will Edwards in Charlotte, North Carolina, at o wiedwards@bloomberg.net.

Last Updated: January 23, 2007 16:09 EST