Bank of America Announces Gain On Merrill Lynch Assets

As I mentioned in my previous post “Cynical view of BofA and Merrill Merger“, Merrill had a surprising “loss” in December of Q4 of 2008, right before Bank of America took over Merrill. This loss led to Bank of America asking for money from the federal government to help it merge with Merrill Lynch, which included a bailout of 100 billion in asset guarantee’s and 20 billion in cash.

Back then, I assumed that the surprise Merrill “loss”  was probably overstated.  The reasons for Bank of America to overstate the losses at Merrill Lynch in Q4 of 2008 were to get the government aid, and also to push profits into 2009, where these profits w0uld then be recognized as part of the combined Bank Of America/Merrill Lynch.

Today, Bank of American released their earnings in which they reported a net profit of 4.2 billion.  Of this profit:

Non Interest income included $2.2 billion in gains related to mark-to-market adjustments on certain Merrill Lynch structured notes as a result of credit spreads widening.

Again, maybe I am being too cynical, but it seems like 50% + of the Q1 profit was from the gain on mark to mark adjustments at Merrill Lynch.  One could also assume that the surprising “loss” at Merrill in Q4 has now become a gain in Q1, and I would also assume that this “gain” will continue in future periods, helping Bank of American show higher profits in 2009.