Bank of America, Citigroup post declines in profit

The banks beat expectations, but shares of both companies fall.

By Elizabeth Strott Jul 16, 2010 10:44AM

Bank of America (BAC) and Citigroup (C) were the latest financial companies to report second-quarter results today, but investors didn't like what they heard.

 

Bank of America said second-quarter net income fell 3% to $3.12 billion, or 28 cents per share before preferred dividends, from $3.22 billion, or 33 cents per share, in the same period a year earlier. Analysts had been looking for 22 cents per share.

 

Total revenue net of interest expense was $29.2 billion, down from $32.8 billion and missing expectations for $29.6 billion.

 

B of A shares were down 95 cents, or 6.2%, to $14.44.

 

The bank's provision for credit losses fell to $8.11 billion from $13.38 billion in the year-ago quarter. Net charge-offs rose to $9.56 billion from $8.7 billion.

 

Bank of America ended the second quarter with a 10.67% Tier 1 capital ratio, compared with 11.93% a year ago. B of A paid back the $45 billion in government loans in December.

 

Citigroup earned $2.7 billion, or 9 cents per share, down from $4.28 billion, or 49 cents per share, a year earlier. Analysts had expected a nickel per share.

 

Total revenue net of interest expense fell to $22.1 billion from $30 billion, missing expectations for $22.4 billion. The drop was due in part to a decline in revenue at the bank's Citi Holdings unit.

 

Fixed-income trading revenue slumped 31% to $3.7 billion from the first quarter, and stock-trading revenue tumbled 46% to $652 million. Investment-banking revenue fell 36% to $674 million.

 

Loan-loss provisions were $6.67 billion in the second quarter, down from $12.68 billion last year and $8.62 billion in the first quarter. Net credit losses fell to $7.96 billion from $11.47 billion last year and $8.38 billion in the previous quarter.

 

"While the market environment lowered revenues in securities and banking, credit improved for the fourth consecutive quarter," CEO Vikram Pandit said in a statement. "We continue to reduce the size of Citi Holdings, and it now makes up less than a quarter of Citigroup's balance sheet."

 

Citigroup shares were down 19 cents, or 4.6%, to $3.97.

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