July 18 (Bloomberg) -- Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc., the three biggest U.S. lenders, reported a total of $10.2 billion in profits for the second quarter that relied on investment banking and asset sales to counter growing losses on consumer loans.
Goldman Sachs Group Inc., which gets almost none of its revenue from retail consumer banking, had a record quarter, reporting earnings of $3.44 billion.
Nine months after accepting more than $200 billion in government rescue funds aimed at preventing a collapse of the financial system, U.S. banks are girding for more losses from mortgages, credit cards and other businesses linked to consumers, while their underwriting and trading units generate revenue at or near all-time highs.
“Capital-markets businesses are going very well right now, and Goldman Sachs is the best of the best,” said Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia. “But the consumer is still struggling out there and anybody with a lot of consumer exposure is struggling along with it.”
Profit at JPMorgan, the second-biggest U.S. bank, was $2.72 billion, or 28 cents a share, and increased for the first time since 2007 on record fees from trading and stock and bond underwriting. The bank ranks No. 1 in underwriting stocks globally and in managing bonds sold in the U.S., according to data compiled by Bloomberg.
Unprofitable Cards
Chief Executive Officer Jamie Dimon, 53, predicted more losses on consumer loans and said credit cards probably wouldn’t be profitable next year. The lender boosted its loan loss reserve by $2 billion in the quarter, adding to the $28 billion set aside to cover credit losses as of March 31.
Bank of America, No. 1 in the U.S. in deposits and assets, reported net income of $3.22 billion, or 33 cents a share. Earnings at the unit that includes trading of bonds, equities and currencies more than quadrupled to $1.38 billion on improved credit markets.
Chief Executive Office Kenneth Lewis, 62, predicted the weak economy would persist into next year, and the Charlotte, North Carolina-based company said debts it no longer expects to be repaid jumped 25 percent to $8.7 billion. The credit-card unit’s $1.62 billion loss compared with a $582 million profit last year.
At Citigroup, the $4.28 billion second-quarter profit was the result of $6.7 billion the New York-based company booked on the sale of a controlling stake in its Smith Barney brokerage. Without that money, the company lost 62 cents a share as costs for bad loans jumped 75 percent to $12.2 billion.
Consumer Banking
Consumer-banking profits at Citigroup tumbled 78 percent, while profit from businesses linked to securities and investment banking increased 13 percent, the company said.
“Our most significant challenge now remains consumer credit,” Chief Executive Officer Vikram Pandit, 52, said in a statement. “Losses in our consumer businesses have been growing for some time, but we see some positive signs of moderation in those loss trends.”
Pandit said in a June 15 speech in Detroit that he expects slow U.S. economic growth in coming years because Americans are saving more and borrowing less. That means Citigroup must use profits from its global banking network, especially in emerging markets, to restore its health, he said.
Goldman Sachs’s record net income was driven by fixed- income, currencies and commodities, the company’s biggest unit. Revenue from the business totaled a record $6.8 billion in the second quarter, which compared with $6.56 billion in the first quarter and $2.38 billion in last year’s second quarter.
No Exposure
“We also continue to benefit from having virtually no direct exposure to the retail consumer business,” Goldman Sachs Chief Financial Officer David Viniar, 53, told analysts on July 14.
JPMorgan and Goldman Sachs were among 10 lenders that repaid a total of $68 billion in TARP funds last month.
Citigroup and Bank of America are the two biggest banks yet to repay government rescue funds from the Troubled Asset Relief Program. Both received $45 billion.
The U.S. continues to back billions of debt sold by the companies through the Federal Deposit Insurance Corp.’s loan guarantee program.
“The government is out there throwing a lot of money behind this whole thing, and if the government ever decides to pull out of this thing, a lot of these Wall Street earnings will go away very quickly,” Miller at FBR Capital said.
No comments:
Post a Comment