Citigroup, Bank of America surprise with profit (Lead)July 18th, 2009 - 12:39 am ICT by IANS
New York, July 17 (DPA) Citigroup and Bank of America Friday reported billions of dollars in second-quarter profits, matching a flow of positive earnings from other US banks this week despite being heavily dependent on government loans for survival.
But both banks also warned of still-high credit risks amid the ongoing financial crisis, and their surprising profits were mostly due to one-time asset sales that won’t be repeated.
Citigroup announced a net income of $3 billion - $4.3 billion before dividend payments - after six quarters of falling ever further into the red.
The entire uptick came from the sale of a controlling stake in the Smith Barney brokerage to rival Morgan Stanley.
Bank of America reported a $2.4-billion profit in the second quarter of 2009. Before dividend payments, the bank’s profit stood at $3.2 billion. The dividend-less profit was down about a quarter from the same period in 2008.
Both banks have taken $45 billion in emergency government loans to weather a financial storm that began in September. Unlike some other Wall Street banks, they are showing no signs of paying the money back.
Their rosier forecasts follow surprising second-quarter profits posted earlier this week by Goldman Sachs and JPMorgan Chase, both of which have already paid back government loans.
Citigroup and Bank of America warned they remained exposed to bad loans in the US housing market, which has long been at the heart of the global financial crisis. Citigroup set aside another $3.9 billion and Bank of America $4.7 billion for future losses.
Citigroup’s Smith Barney sale netted the company $6.7 billion after taxes while Bank of America brought in $9.1 billion from two asset sales, creating questions as to whether the companies could continue to earn profits in the near term.
“Our most significant challenge now remains consumer credit,” Vikram Pandit, Citigroup’s chief executive officer, said in a statement. “Losses in our consumer businesses have been growing for some time, but we see some positive signs of moderation in those loss trends.”
Bank of America’s CEO Kenneth Lewis warned rising unemployment was driving fears that more Americans will default on their loans. The weak economy was likely to continue until 2010, he said.
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Tags: asset sales, bank of america, chief executive officer, citigroup, dividend payments, emergency government, financial storm, global financial crisis, goldman sachs, government loans, jpmorgan chase, morgan stanley, morgan stanley bank, pandit, quarter profits, s smith, smith barney, uptick, us housing market, wall street banks