UPDATE 2-Bank of America beats on bond trading boost, loan growth

Bank of America Corp beat analysts' estimates for quarterly profit on Wednesday, as a boost from bond trading and growth in its loan book helped the second-biggest U.S. lender blunt a hit from lower interest rates.

Bond trading has been a bright spot for big U.S. banks that reported fourth-quarter results this week, largely due to easy comparisons from a year earlier when financial markets were selling off due to concerns over trade and global growth. Bank of America reported a 25% rise in bond trading revenue, although that was far short of the 86% surge at JPMorgan Chase and Co and a 49% jump at Citigroup Inc.

Loans grew 6% at Bank of America, significantly outpacing increases at Citigroup and JPMorgan. Bank's deposits rose 5%. "Solid client activity in growing loans and gathering deposits helped us offset spread compression," Chief Financial Officer Paul Donofrio said in a statement.

However, revenue in consumer banking, the bank's biggest business, fell 5% to $9.5 billion, largely due to the three interest rate cuts last year by the Federal Reserve. The bank's net interest margin, which measures how profitably a bank can lend out depositors' funds, fell to 2.35% from 2.52% a year earlier, and from 2.41% in the prior quarter.

Bank of America is the most vulnerable among the big U.S. banks to fluctuations in interest rates because of its large deposit stock and rate-sensitive mortgage securities. Net income applicable to common shareholders fell to $6.75 billion in the fourth quarter ended Dec. 31, from $7.04 billion a year earlier.

Excluding items, the bank reported a profit of 75 cents per share, beating analysts' estimate of 68 cents. Revenue, net of interest expense, fell slightly to $22.35 billion.