Citigroup Profit Up 13% in 2nd Quarter; BofA Posts 2% Drop

Citigroup Inc., the No. 1 U.S. bank holding company, posted a 13% increase in quarterly profit Monday on growth in its consumer arm, but No. 3 Bank of America Corp. reported a 2% drop in earnings because of loan losses.

Separately Monday, the Federal Reserve approved Citigroup’s proposed $12.5-billion acquisition of Mexico’s Grupo Financiero Banamex-Accival (Banacci), the largest banking merger in Latin American history.

The Mexican government and Federal Competition Commission already had approved the deal.

Citigroup, which is also the No. 1 U.S. financial services company, said its second-quarter operating profit rose to $3.79 billion, or 74 cents a share, from $3.34 billion, or 65 cents, in the year-earlier quarter. The results were a penny higher than the average estimate of analysts polled by First Call/Thomson Financial.

The company benefited from its vast global consumer operation, which saw profit rise 19% to $1.89 billion, helped by the Federal Reserve’s six interest rate cuts this year.

Profit at Citigroup’s global corporate arm, which includes investment banking, rose 10% to $1.67 billion. Emerging markets corporate banking income rose 35% to a record $467 million.

Citigroup’s income from emerging markets rose 28% to $777 million in the quarter, with 34% profit growth in Asia and 15% profit growth in Latin America.

The company’s purchase of Banacci, Mexico’s second-largest banking company, would make it a leader in Mexico and boost its profit from emerging markets to more than 25% of its overall earnings.

Income at the company’s consumer finance operation, CitiFinancial, jumped 40% to $286 million, helped by the company’s acquisition last year of Associates First Capital Corp.

At Bank of America, profit fell to $2.02 billion, or $1.24 a share, from $2.06 billion, or $1.23, a year ago, but the results were better than the $1.18 average estimate of analysts.

The bank’s provision for credit losses rose to $800 million from $470 million a year earlier.

Consumer charge-offs increased by $96 million, partly because of a rise in personal bankruptcy filings in the first part of the year.

But Bank of America’s net interest income, or money it makes from lending, rose 9% to $5.12 billion, helped by lower rates. Non-interest income rose 6% to $3.74 billion, lifted by service charges and mortgage banking fees.

Money the bank makes from advising companies on new stock and bond offerings and mergers rose 22% to $455 million, while trading profit dropped 99% to $109 million, hurt by tumbling stock prices in the quarter.

Total revenue rose 8% to $8.86 billion.

Meanwhile, Bank of New York Co. reported an 8% rise in second-quarter profit to $385 million, or 52 cents a share, missing analyst forecasts by a penny, and said future earnings could fall slightly short of expectations if weak market conditions continue.

Bank of New York’s latest results were helped by higher fees generated from stock and bond trading.

Cincinnati-based Fifth Third Bancorp said profit grew 14% to $338.2 million, or 58 cents a share, benefiting from loan growth and few bad loans.

Citigroup’s shares rose 29 cents to $49.15 on Monday, and Bank of America’s rose $1.13 to $61.38, both on the New York Stock Exchange.

Bank of New York’s shares fell $6.40, or 13%, to $43 on the NYSE. Fifth Third’s fell $2.42 to $60.42 on Nasdaq.