Two ailing banks that just a few months ago symbolized many of the troubles afflicting the American banking system posted strong second-quarter profits Friday, exceeding analysts' expectations.
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."
---- Compiled from wire reports and other media sources