Bank of America Corp reported the biggest quarterly loss in its history, $8.8 billion, after more than $20 billion of charges linked to mortgages.
The results were in the middle of the range the bank forecast in late June when it announced an $8.5 billion settlement with mortgage investors.
Tuesday's quarterly results showed the bank's general loan losses are improving, in line with competitors, but overall results were overwhelmed by mortgage losses.
"It's a slow grind for them," said David Hendler, senior analyst at CreditSights in New York.
The largest U.S. bank by assets reported a net loss of $8.8 billion, or 90 cents per share, compared with net income of $3.1 billion, or 27 cents per share, a year earlier.
Analysts on average expected a loss of 90 cents per share, according to Thomson Reuters I/B/E/S.
On June 29, the bank announced it would take a series of big one-time charges in the quarter related to a settlement with private investors who demanded the bank repurchase toxic home loans held in mortgage-backed securities.
Excluding the charges, the bank earned $3.7 billion, or 33 cents per share, for the second quarter.
The results highlight that many of the banks' business units -- most notably its credit card and investment banking units -- are becoming more profitable.
Global card services reported income of $2 billion, up from $826 million a year ago; global banking and markets income rose to $1.6 billion from $1 billion.
BofA's consumer real estate services unit lost $14.2 billion in the quarter, continuing a series of losses for the business dating back to the 2008 financial crisis.
Overall, revenue tumbled 54 per cent to $13.5 billion, due to a provision taken as part of the mortgage settlement. Excluding that provision, revenue totalled $26.5 billion.
Like its peers, including JPMorgan Chase & Co and Citigroup Inc, BofA reported improving credit quality as loan losses continued to decline.
At BofA, net charge-offs -- loans the bank is writing off -- declined for the fifth straight quarter, and the bank lowered its loan loss provision.
The previously announced mortgage settlement reduced the bank's Tier 1 common equity ratio -- a core capital metric regulators use to judge a bank's health -- to 8.23 per cent during the quarter.
Earlier this year the Federal Reserve denied permission for BofA to raise its dividend later this year. The bank currently pays 1 cent per share quarterly.
Some analysts have questioned whether a large second quarter loss would push such a move into 2012.
BofA shares fell 9 cents to $9.63 in pre-market trading. The shares fell 2.8 percent on Monday and have declined 27 per cent this year, compared with a 12 per cent drop in the KBW Banks Index.