Banks Reap Healthy Profits as They Cut Costs, Collect Fees

From Bloomberg News

Bank of America Corp., the nation's largest banking company, and other major financial services companies reported higher second-quarter earnings as they cut costs and took in more fees.

J.P. Morgan & Co., Citigroup and Wells Fargo & Co. all posted profit increases of more than 20%, outperforming a 2% rise at Bank of America, which struggled to boost revenue following last year's merger of NationsBank Corp. and BankAmerica Corp.

Banks are reaping the benefits of the nation's longest-running peacetime economic expansion, with consumer spending the strongest in 11 years and equity markets smashing previous highs. Fees from credit cards and investment banking helped fuel earnings growth.

Bank of America's profit from operations grew 2% from a year ago to $2.06 billion, or $1.15 a share, excluding a $145-million after-tax charge related to the merger. Analysts were expecting $1.14 a share.

The banking giant's expenses fell as it cut jobs and reduced the number of branches and automated teller machines.

Non-interest income fell 3.1% to $3.52 billion, as declines in mortgage servicing and investment banking income more than offset gains in credit card income and trading of 27% and 70%, respectively.

Citigroup, the world's second-largest financial services company, said its profit jumped 21% to $2.48 billion, or 71 cents a share, beating forecasts of 65 cents. Citigroup said it has cut $1.7 billion in costs so far this year, on track to meet its $2 billion target.

Net income jumped 40% in the consumer banking unit. Credit card earnings climbed 96%, boosted by acquisitions and a decline in bad loans.

Profit from retail bank Citibank's North American operations nearly tripled as it slashed jobs.

* Wells Fargo's net income grew 29% to $931 million, or 55 cents a share. Revenue from its consumer and small-business banking earnings jumped 46% to $710 million as its merger with Minneapolis-based Norwest Corp. started to pay off. Norwest bought Wells Fargo in November, taking the Wells Fargo name and moving its headquarters to San Francisco. The bank's Norwest Mortgage unit said earnings rose 29%. Net interest income rose 3.56%, while non-interest income rose 5.8%.

* J.P. Morgan's profit increased 25% to $504 million, or $2.52 a share, from $402 million, or $1.96, a year ago. Including a gain a year earlier of $79 million from the sale of the firm's global trust and agency business, net income rose 4.8% from $481 million, or $2.36 a share. Net interest revenue rose 47% to $425 million.

* Bank of New York Co., the world's largest processor of institutional stock and bond transactions, said second-quarter earnings rose 9.5% to $323 million, or 42 cents a share, as it benefited from increased trading activity. The results were in line with estimates. Fees from securities processing rose 23%. Non-interest income rose 16% and net interest income rose 0.7%.

At a Glance

Other earnings, excluding one-time gains and charges unless noted:

* Univision Communications Inc. said its second-quarter profit rose 54% to $20.5 million, or 17 cents a share, 2 cents higher than estimates, as advertisers spent more to reach viewers of the largest Spanish-language television network in the U.S. The Los Angeles-based company's revenue edged down 0.6% to $172.4 million. Univision has been raising its advertising rates as companies spend more to reach the fast-growing Latino population.

* Alaska Air Group Inc. said second-quarter earnings rose 8.2% to $42.1 million, or $1.59 a share, well above the expected $1.36. Revenue rose 9.2% to $529.7 million, as passenger traffic rose 3.5% at Alaska Air and 26% at Horizon.

* Legg Mason Inc., an investment management company and brokerage, said first-quarter earnings jumped 35% to $32.8 million, or 54 cents a share, well beyond the average analyst estimate of 47 cents. Revenue rose 26% to $314.6 million.

* The New York Stock Exchange reported flat second-quarter profit of $30.5 million on an 8% gain in revenue to $193.7 million as the number of new companies listing their shares on the world's largest stock market fell. The NYSE, a not-for-profit membership organization, does not comment on its quarterly results.

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