Banks, Brokerages Top Expectations in First Quarter
Bank of America Corp., Citigroup Inc., Merrill Lynch & Co. and Bank of New York Co.--among the biggest U.S. banks and brokerages--all reported first-quarter profit that beat expectations, powered by surging stocks.
Charles Schwab Corp., the No. 1 U.S. discount and Internet brokerage, said its profit nearly doubled, also exceeding forecasts, as customers kept pouring money into their accounts to trade stocks.
Profit grew 17% at Bank of America, the nation’s largest bank. At Citigroup, the nation’s largest financial services company, profit jumped 49%. Merrill, the biggest U.S. securities firm, reported a 71% increase. Bank of New York, the world’s largest securities processor, said earnings rose 6.8%.
For large banks and brokers, whose earnings are sensitive to swings in the debt and equity markets, the first-quarter results may represent a high-water mark. Rising interest rates and last week’s stock market rout could crimp investment banking and consumer finance results in coming quarters.
Schwab, however, expects its earnings growth to remain on track despite the recent market downturn.
“It’s very early in the year to make a call on whether there’s a bear market or not,” Schwab Chief Financial Officer Christopher Dodds told Reuters. “We don’t see anything that causes us to markedly revise our outlook for the year as of yet. We’re still planning on a healthy year of growth and customer acquisition.”
* Bank of America said higher fees from its securities unit and gains from its investments in companies pushed net income to $2.24 billion, or $1.33 a share, beating forecasts of $1.24 a share. Fees from underwriting securities rose 149% as the company benefited from the bull market and a flood of initial public offerings in the first quarter. Non-interest income grew 26% to $4.05 billion.
* Citigroup, parent of Citibank, Travelers Property Casualty Corp. and Salomon Smith Barney Inc., said first-quarter earnings surged to $3.6 billion, or $1.04 a share, as its lending and consumer finance businesses benefited from the record economic expansion. The results, which exclude restructuring charges, far exceeded the average forecast of 78 cents.
Income in the global consumer unit, which includes Citibank, credit cards and insurance, rose 23%. Banking and lending income rose 27% and insurance income rose 12%. Corporate and investment banking income rose 36%. Salomon Smith Barney’s income rose 48%.
* Merrill Lynch earnings soared to $1.04 billion, or $2.38 a share, as trading rose 24% and investment banking revenue rose 57%. Commissions rose 37.8% to $2.15 billion. Revenue from asset management rose 25% to $1.39 billion. * Schwab, which has 6.9 million customers, said it earned $297 million in the quarter, or 35 cents a share, excluding one-time charges for acquisitions, up from $143 million, or 17 cents, a year ago. Analysts expected 32 cents. Net revenue climbed 65% to $1.57 billion. Schwab customers put a record $44 billion more into their accounts in the quarter, bringing the brokerage’s total client money to $823 billion. The company said it opened a record 494,000 new accounts in the quarter. Schwab’s average daily trading volume soared 90% to a record 310,000.
* Bank of New York’s profit rose to $338 million, or 46 cents a share, a penny better than estimates, on higher fee income from processing stocks and bonds. The bank collects fees for holding stocks and bonds for clients and handling clerical duties such as collecting dividend payments. Those fees from securities processing rose 28% to $372 million, lifting total non-interest income 18% to $737 million.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
* Alcan Aluminium Ltd. said profit climbed more than fourfold in its first quarter because of higher prices for raw aluminum. Net income soared to $174 million, or 78 cents a share, well beyond analyst expectations of 70 cents, from $38 million, or 16 cents, in the year-ago period. Sales rose 7.7% to $1.96 billion.
* Comerica Inc., a large Midwest regional bank, said first-quarter earnings rose 12% to $178 million, or $1.10 a share, a penny better than expectations. Comerica, which lends mostly to small and medium-sized companies in Michigan, California and Texas, said fees from commercial loans rose 13% and advisory fees jumped 44%.
* Eastman Kodak Co.’s first-quarter profit grew 15% to $297 million, or 95 cents a share, two cents better than forecasts, from $259 million, or 80 cents in the year-ago period, as cost-cutting made up for stagnant U.S. film sales. Losses at Kodak’s digital business, which includes cameras, photo finishing equipment and online film processing, narrowed to $4 million, helping overall results. Revenue was flat at $3.1 billion. Revenue estimates of five analysts surveyed by Bloomberg News ranged from $3.19 billion to $3.25 billion. The firm reiterated that it expects sales to rise 6% to 7%, excluding foreign currency transactions, this year.
* Eli Lilly & Co., whose drugs include the world’s top-selling antidepressant, Prozac, said first-quarter profit rose 18% to $692.3 million, or 63 cents a share, beating expectations by two cents. Sales grew 12% to $2.54 billion. Prozac sales edged up 1% to $596.2 million after declining for two quarters. Sales of Zyprexa, a schizophrenia medicine, rose 14%, while sales of diabetes products, including the pill Actos and insulin Humulin, jumped 53%.
* R.J. Reynolds Tobacco Holdings Inc. said first-quarter profit rose 5.3% to $80 million, or 77 cents a share, exceeding forecasts of 74 cents, as retailers bought more cigarettes at higher prices. Revenue rose 14% to $1.92 billion.
* Sears, Roebuck & Co. reported a 61% jump in first-quarter earnings to $235 million, or 65 cents a share, as the second-largest U.S. retailer boosted department store sales, cut costs and set aside less cash for uncollected credit card accounts. Revenue rose 3.7% to $8.97 billion. Chairman Arthur Martinez has been adding shopping carts, emphasizing low prices and relying on a new advertising campaign to help win back shoppers from rivals. Sears earlier this month said it would earn 62 cents to 67 cents a share, prompting analysts to raise forecasts to an average 65 cents from 46 cents.
* U.S. Bancorp said profit from operations rose 5.2% to $387.6 million, or 52 cents a share, falling a penny short of estimates, partly because of higher expenses.
