IT SEEMS to be a good earnings season for US banks, with even Citigroup beating the analysts yesterday despite its losses and JP Morgan and Wells Fargo doing well last Friday. But while we wait to see if Goldman Sachs and State Street, both reporting today, and Bank of America Merrill Lynch and BNY Mellon, reporting on Wednesday, can surprise to the upside, it is worth looking at Citi’s performance beyond its share price jump.
Thanks to a one-time $4.7bn (£2.9bn) loss over the sale of its stake in Smith Barney, Citi did less badly than it might, rather than actually doing well. Yes, with all of the quarter’s one-time costs stripped out, Citigroup reported net income of $3.3bn for the third quarter of 2012, 27 per cent higher than in the third quarter of 2011. That helps explain the rise in its share price that followed. But the group’s actual unadjusted net income was $468m, down from $3.8bn the previous year.
Also, while within North American Global Consumer Banking, retail banking revenues grew 35 per cent from the third quarter of 2011 to $1.7bn, largely due to increased mortgage revenues, Citi’s housing boost didn’t match that of JP Morgan and Wells Fargo, despite Ben Bernanke’s best efforts.
But the real alarm bells sounding behind the cheerful reports from US banks are the new lawsuits brought against JP Morgan and Wells Fargo. If US banks are back in the firing line, their future looks bleak, whatever the numbers say.