Bank of America, Citigroup Report Strong Profits
Bank of America reported profits of $3.2 billion, with Citigroup reporting $4.3 billion for the April to June period.
Like Goldman Sachs and JPMorgan Chase, which this week also posted surprisingly large second-quarter profit reports, the banks owe some of their success to the strength of their trading divisions.
But analysts also cautioned that the banks would have lost billions had they not benefited from one-time gains: Citigroup offset its losses thanks to the sale of its Smith Barney brokerage unit into a joint venture, and Bank of America made billions thanks to the sale of part of its investment in a major Chinese bank.
Bank of America announced earnings of 33 cents a share, and Citigroup reported earnings of 49 cents a share. Citigroup’s report, in particular, surprised Wall Street analysts, who had predicted a loss of 18 cents a share for the bank.
Both banks have yet to repay the billions in bailout money provided by the federal government. Bank of America has received a $52.5 billion lifeline so far, and Citigroup $45 billion.
The CEOs of both banks are under pressure to improve their books. Former Treasury Secretary Henry Paulson testified on Capitol Hill Thursday about Bank of America’s controversial purchase of Merrill Lynch last fall, a decision that has earned Bank of America CEO Kenneth Lewis ire among his major shareholders. Citigroup CEO Vikram Pandit, meanwhile, has strained relations with Washington regulators.
Both CEOs struck cautious notes Friday. Lewis said in a statement that “difficult challenges lie ahead from continued weakness in the global economy.” Pandit acknowledged that “our most significant challenge now remains consumer credit.”