Citigroup Posts Higher Profit
Citigroup Inc., the No. 1 U.S. financial services company, on Tuesday posted higher fourth-quarter profit as its vast consumer banking business flourished, but earnings of Bank of America Corp., the parent of the top U.S. bank, dropped on loan and investment losses.
Wells Fargo & Co. led regional banks in posting healthy fourth-quarter profit increases, meeting Wall Street’s expectations and showing resilience in face of the U.S economic slowdown.
The fourth quarter was difficult for the nation’s banks because a string of interest rate increases by the Federal Reserve stunted growth at some companies and caused them to miss debt payments.
Stock markets also tumbled in the quarter, depressing trading volumes and profits the largest banks make from helping companies with new share offerings.
Still, Citigroup posted gains as its North American credit card arm and its insurance business bolstered results, offsetting a stock market slump.
Citigroup said profit rose 11% to $3.33 billion, or 65 cents a share, in line with forecasts by analysts surveyed by First Call/Thomson Financial. The results included $146 million in charges, mostly for a loss provision for the truck loan and leasing portfolio of Associates First Capital Corp., which Citigroup bought last year.
Profit at the global consumer group, which encompasses credit cards, mortgages, consumer finance and banking, rose 25% to $1.47 billion, boosted by the Associates First acquisition.
But the stock market slump pulled down profit at the Salomon Smith Barney securities unit by 13%.
Bank of America’s profit fell 27% to $1.39 billion, or 85 cents a share, a penny less than forecasts, in part because of losses in its large corporate loan portfolio.
The stock market slide helped drive the Charlotte, N.C.-based bank’s non-interest income down 8% to $3.3 billion. Trading account profit fell 8%, while investment banking fees dropped 7%.
The bank’s provision for credit losses climbed to $1.21 billion from $350 million, while net charge-offs, or write-offs taken against loan loss reserves, increased to $1.08 billion, or about 1.07% of loans and leases, from $501 million, or 0.55%, a year earlier.
Bank of America said it expects loan losses to rise this year. Nonperforming assets, or loans with potential repayment problems, are expected to rise “for the foreseeable future,” said James Hance, chief financial officer.
West Coast heavyweight Wells Fargo said net income rose 9% to $1.13 billion, or 65 cents a share, helped by recent successful mergers.
However, the San Francisco-based bank said its provision for loan losses jumped 20%, and it expects to see continued upward pressure on nonperforming assets. Analysts and investors watch these numbers closely to gauge whether the slowing economy is pushing companies and individuals to default on their loans.
Non-interest income rose 18% to $2.61 billion. Trust and investment fees jumped 18% to $421 million.
At a Glance
Other banking earnings, excluding one-time gains or charges unless noted, include:
* Bank of New York Co.’s profit jumped 14% to $372 million, or 50 cents a share, from $327 million, or 44 cents, in line with forecasts, on higher fees from handling stock, bond and currency transactions.
* San Marino-based East West Bancorp Inc. reported fourth-quarter net income of $9.6 million, or 40 cents a share diluted, up 22% from a year ago. For the full year, East West’s net income rose 27% to $35.5 million, or $1.53 a share. At year-end, the bank holding company reported total assets of $2.5 billion, up 15% from $2.2 billion a year ago. East West also said it has completed the acquisition of Century City-based Prime Bank.
* KeyCorp said profit rose 3% to $272 million, or 63 cents a share, beating forecasts by 3 cents, helped by its reorganization.
* Fifth Third Bancorp said net income rose 18% to $236 million, or 50 cents a share, matching expectations, helped by higher credit and debit card usage and deposit service charges.
* Firstar Corp. said profit from operations surged 21% to $394.3 million, or 41 cents a share, in line with forecasts.
* Mellon Financial Corp. reported a 6% rise in earnings to $255 million, or 52 cents a share, matching analyst estimates.
* L.A.-based Cathay Bancorp, the holding company for Cathay Bank, reported fourth-quarter net income of $9.7 million, or $1.07 per share, compared with $8.7 million, or 96 cents, a year ago. For the year, net income rose 27% to $38.6 million and total assets were $2.2 billion versus $1.9 billion.
