CORRECTED - TOPWRAP 6-Bank of America, GE weigh on recovery optimism

(Corrects paragraph 6 to show Citibank's loss, excluding items, was greater than expected. The error also appeared in previous updates)

* Bank of America earnings down, GE profits tumble

* Citibank in profit thanks to one-off gain

* U.S. housing starts and permits jump in June

* German economy ministry hints at end to recession (For more on the global crisis, click [nCRISIS])

By Matthew Robinson

NEW YORK, July 17 (Reuters) - A surge in credit losses reported by Bank of America Corp (BAC.N) on Friday and a steep drop in General Electric Co'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 and warned results would continue to be hurt by troubled loans from credit card, mortgage and business customers due to the weak economy. For related news click [ID:nN1768434].

"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, greater than analysts' consensus forecast. [ID:nN17470666]

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.

U.S. conglomerate GE's profits fell by nearly half as revenues dropped 17 percent -- well above expectations for a 10 percent drop -- as the slump that has gripped its finance and media businesses also dragged on its heavy industrial units. [ID:nN17269520]

U.S. stock markets soured on the reports, trading lower after positive earnings earlier in the week and strong economic data from Asia lifted hopes for a turnaround in the global economic recovery. [.N]

Goldman Sachs (GS.N) on Tuesday said quarterly earnings surged 33 percent while JPMorgan Chase & Co (JPM.N) reported a 36 percent rise on Thursday.