Earnings Slump at Citigroup, BofA
Citigroup Inc. and Bank of America Corp. posted lower first-quarter profits Monday because of loan and investment losses in the slowing U.S. economy.
A third large bank, First Union Corp., also reported a decline in quarterly earnings as it announced plans to buy rival Wachovia Corp. in an effort to boost profit and cut costs in a tough market.
Meanwhile, regional bank holding companies Bank of New York Co. and Fifth Third Bancorp, which rely more on traditional lending operations, reported higher quarterly profits, partly because of loan growth.
The Federal Reserve cut interest rates three times in the quarter in an effort to rejuvenate the U.S. economy, encourage lending and take pressure off cash-strapped borrowers.
At Citigroup, the largest U.S. financial-services company, operating profit fell 7% to $3.66 billion, or 71 cents a share, as investment losses and weak revenue from advising companies on new stock offerings offset growth at its consumer operations. Wall Street analysts on average had expected 70 cents, according to First Call/Thomson Financial.
The first quarter was the slowest for new stock offerings in more than a decade.
Chief Executive Sanford I. Weill said Citigroup’s diversified activities--ranging from banking and investment to insurance and private wealth management--had helped it in volatile market times.
Citigroup’s global corporate division reported a 7% decline in profit to $1.75 billion, hurt in part by rising expenses and declining production at its Salomon Smith Barney securities arm.
Citigroup’s income from its investments operation fell 79% to $136 million.
Meanwhile, profit at Citigroup’s vast consumer operation rose 18% to $1.78 billion, helped by growth in its U.S. credit card business and operations in Japan.
Bank of America, the No. 3 U.S. bank holding company, said its profit fell to $1.87 billion, or $1.15 a share, from $2.24 billion, or $1.33 a share, a year earlier. The results beat analysts’ average forecast of $1.12, according to First Call.
A $415-million increase in its provisions to guard against bad loans, as well as a $416-million drop in equity investment gains, hurt Bank of America in the quarter, the Charlotte, N.C., company said.
“It is clear . . . that the increasingly weak economic environment is making it difficult for our efforts to show up on the bottom line,” said Chief Executive Hugh L. McColl Jr.
At Bank of New York, the parent of one of the oldest U.S. commercial banks, first-quarter earnings rose 14% to $384 million, or 52 cents a share, as fees from securities-servicing operations increased.
Midwest bank Fifth Third said its profit rose 18% to $244.3 million, or 51 cents a share, helped by loan growth and stable credit quality.
On the New York Stock Exchange, Citigroup’s stock fell 35 cents to close at $46.96, while Bank of America slipped 50 cents to close at $52.45 and Bank of New York closed up 15 cents at $49.65. Fifth Third fell 51 cents to $5.03 on Nasdaq.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
* Cargill Inc., the largest U.S. agricultural company, said fiscal third-quarter profit plunged 48% to $99 million from a year ago as demand for some products weakened and high energy costs eroded returns at fertilizer and grain plants. The privately held company didn’t disclose its revenue.
* Continental Airlines Inc. said its first-quarter earnings sank 36% to $9 million, or 16 cents a share, as business-travel purchases weakened along with the economy and fuel prices stayed high. Analysts on average were expecting a 9-cent profit, with estimates ranging from a loss of 20 cents to a profit of 15 cents. Revenue rose 8% to $2.45 billion. All other major U.S. carriers besides Southwest Airlines Co. are expected to post losses for the quarter.
* Eli Lilly & Co.’s first-quarter profit increased 17% to $806.8 million, or 74 cents a share, a penny better than analyst expectations, on a 10% rise in revenue to $2.81 billion. Sales of schizophrenia drug Zyprexa, which has overtaken Prozac as Lilly’s largest product, jumped 34%. Prozac sales were up just 2%. Lilly said it expects second-quarter profit of 73 cents to 75 cents a share, more than the 71-cent average estimate of analysts polled by First Call.
* New York Times Co. said first-quarter earnings dropped 26% to $61.3 million, or 37 cents a share, matching analyst expectations, as sales declined 5.3% to $778.2 million. The company also said second-quarter profit will miss analyst estimates because of lower advertising sales. It expects earnings of 46 cents to 52 cents for the second quarter, rather than the 60-cent consensus estimate and down from 59 cents a year ago.
