Bank of America, GE profits tumble

By Matthew Robinson

NEW YORK (Reuters) - A surge in credit losses reported by Bank of America (BAC.N) on Friday and a steep drop in General Electric's (GE.N) revenue damped recovery hopes after promising earnings and data earlier in the week.

A report showing a jump in U.S. housing starts and permits in June and signals from Germany's economy ministry that Europe's largest economy may have come out of recession helped temper the gloom over U.S. earnings, however.

Bank of America, the largest U.S. bank, said second-quarter net income fell 25 percent to $2.42 billion (1.5 billion pounds) and warned results would continue to be hurt by troubled loans from credit card, mortgage and business customers due to the weak economy..

"Difficult challenges lie ahead from continued weakness in the global economy, rising unemployment and deteriorating credit quality that will affect our performance for the rest of the year and into 2010," Chief Executive Kenneth Lewis said.

No. 3 U.S. bank Citibank reported a $4.3 billion quarterly profit, thanks to the merger of its brokerage arm into a new venture after struggling survive the financial crisis.

Stripping out the one-off gain, it suffered a loss, albeit smaller than analysts' consensus forecast.

Citibank took a $45 billion bailout from the U.S. Treasury

last year as part of a $125 billion program to keep afloat top banks crippled by bad debts from the U.S. housing meltdown.