Still relatively weak amid a recession-mired economy, Bank of America and Citigroup nevertheless reported healthy profits for the second quarter, making 3.2 billion dollars and 4.3 billion dollars respectively.
AFP - The latest quarterly results from the ailing banking sector show major lenders appear to be healing but with some segments of the business still weak amid a recession-mired economy.
On Friday, Bank of America and Citigroup reported healthy profits for the second quarter, although Citi's results were skewed by a one-time gain that offset hefty losses.
Earlier in the week, JPMorgan Chase and Goldman Sachs beat market expectations with strong earnings, although they stemmed mainly from the institutional, or Wall Street side, of operations, with consumer segments still struggling.
Nonetheless, the sector seen as critical to an economic recovery showed marked improvement on the heels of a massive effort by the US government to steady the financial system that included capital injections of tens of billions of dollars.
Bank of America said it earned 3.2 billion dollars in the second quarter, down 5.9 percent from a year ago but better than most forecasts.
The largest US bank by assets said it paid preferred dividends of 805 million dollars including 713 million to the US government for its capital injections, part of a program to stabilize the financial system.
That left shareholders with a profit of 33 cents per share, better than market expectations of 28 cents per share.
Revenues rose 60 percent from a year ago to 33.1 billion dollars, lifted in part by the acquisition of Wall Street brokerage Merrill Lynch.
"Having positive net income in an extremely challenging environment speaks to the diversity and strength of our business model as well as the extraordinary effort put forth by all of our associates," said Kenneth Lewis, chief executive officer and president.
Douglas McIntyre at 24/7 Wall Street said the results at Bank of America were "remarkable" considering that it was "forced into a horrible deal to buy Merrill Lynch."
But he also noted that "the firm did indicate that credit quality continued to drop, a potential Achilles heel going forward."
In a more mixed result, Citigroup said Friday it earned a profit of 4.3 billion dollars in the second quarter, resulting from a big one-time gain on a joint brokerage venture.
But Citi also posted hefty losses from its real estate and trading operations as it continued to be battered by the global financial crisis.
Citi's results rebounded from a 2.49-billion-dollar loss in the same period a year ago, but the profit came from a one-time pretax gain of 6.7 billion dollars, or 11.1 billion before taxes, from creating the Morgan Stanley Smith Barney joint brokerage.
The deal closed June 1 put Citi's Smith Barney unit together with the trading division of Wall Street rival Morgan Stanley, with Citi getting cash as part of the deal.
Citigroup's total revenues were 30 billion dollars, up a sharp 12.4 billion from the second quarter of 2008, due primarily to the Smith Barney gain.
John Carney at the financial website Clusterstock said Citi's results excluding the Smith Barney deal would show a loss of 27 cents a share, slightly better than Wall Street estimates.
But he said the bank is still hobbled: "Citi's loan portfolio continues to suffer. It has posted an additional 3.9 billion dollars to loan loss reserves."
The number-three US bank in terms of assets, which needed special help from the government to weather the financial crisis, lost 18.72 billion for all of 2008 before returning to the black with first-quarter earnings of 1.6 billion dollars.
Citi, once the world's biggest financial services firm, has received 45 billion dollars in bailout funds from the government in the form of capital injections.
In June, Citigroup finalized plans to convert its Treasury capital injection into common stock, a move that gives the government a major stake in the ailing banking group.
On Thursday, JPMorgan Chase provided more evidence of a recovering banking sector, posting a surprisingly strong quarterly profit of 2.7 billion dollars.
Goldman Sachs shattered forecasts Tuesday with 3.44 billion dollars in quarterly profit after paying back a US government bailout.
Yet the improving outlook for the sector is clouded by a potential collapse of large business lender CIT Group, which failed in its bid for a fresh government bailout and appeared headed for bankruptcy.
Date created : 2009-07-18