Citigroup, Bank of America surprise with better results

Citigroup and Bank of America, the stricken US banking giants, surprised Wall Street analysts by posting better than expected second-quarter earnings on Saturday. After taking billions of taxpayer dollars to stave off collapse, the Citi and BoA results were eagerly anticipated in the wake of impressive figures from Goldman Sachs and JP Morgan earlier this week.

Bank of America, which has endured a number of problems since merging with Merrill Lynch last year, said its earnings after payment of preferred dividends were $2,42-billion in the second quarter - a fall on a year ago but still ahead of forecasts.

It said its results reflected a gain from selling part of its stake in China Construction Bank and, like Goldman Sachs and JPMorgan, said it had a handsome profit from its trading business.

Bank of America reported continuing losses from failed loans. It recorded a $13,4-billion provision for loan losses during the second quarter as consumers struggled with debt amid rising unemployment.

Citigroup reported a $4,3-billion second-quarter profit thanks to gains on its Smith Barney deal, although its primary banking businesses continue to suffer from rising credit losses.

The bank, propped up with $45-billion of taxpayers’ money since markets imploded last autumn, recorded a $6,7-billion gain from merging Smith Barney into a brokerage venture with Morgan Stanley.
Under accounting rules, Citi gets to mark up its entire stake in the venture, of which Morgan owns 51%.

Bank of America said its results also reflected a gain from selling part of its stake in China Construction Bank. The results included $713-million in dividend payments tied to a federal bailout and a charge to bolster a federal deposit insurance fund.

The company said its mortgage revenue rose after its acquisition of lender Countrywide Financial, reflecting the refinancing boom triggered by lower mortgage rates. -

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