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Banks beat 3Q forecasts
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October 18, 1999: 3:24 p.m. ET
Citigroup, Bank of America, Morgan boost profits after weak '98 period
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NEW YORK (CNNfn) - Several of the nation's top banks reported better-than-expected operating earnings Monday, reflecting a strong rebound from market softness a year ago.
Citigroup, the world's largest financial services company, reported a 243-percent jump in income, J.P. Morgan said profits rose nearly threefold, and Bank of America said operating earnings rose more than five-fold.
Such increases underscore how the performance of banks is tied to market conditions. A year ago, jitters in Asia and Russia led to shock waves in stock and bond markets, sharply curbing earnings at many of the top banks. But in the most recent quarter, those fears have been replaced with better credit quality at home and abroad.
"The earnings have been good. It indicates the fundamental trends are continuing to be good for the banking industry," said Ron Mandle, a banking analyst at Sanford C. Bernstein, who said the good times should continue. "I think we'll see 10 to 12 percent growth for the industry next year."
Wall Street reacted positively. Shares of Citigroup rose 1-1/16 to 43-3/16, Bank of America rose 1-1/8 to 49-5/16 and J.P. Morgan was the top Dow gainer percentage-wise, rising 3-1/4 to 108-15/16. Stocks in the sector have been drifting in recent weeks.
Better credit quality, an improvement in international and domestic consumer lines, and strength in venture capital led to the gains at those banks. But an unclear interest rate picture -- with rates rising -- kept a lid on the improvement.
New York-based Citigroup (C), the world leader in financial services, earned $2.5 billion, or 70 cents a diluted share, up from $729 million, or 20 cents per share, a year earlier.
The latest results beat the First Call consensus estimate by 2 cents per share. Revenue rose 33 percent to $14.6 billion.
Citigroup, the umbrella under which commercial banking powerhouse Citibank, Travelers insurance and top-tier Wall Street firm Salomon Smith Barney reside, weathered a tricky interest-rate climate.
"It's large and complicated, but the moral of the story is that even with the back-up interest rates and concerns about liquidity, the company still managed to post 70 cents a share," said Diane Glossman, a banking analyst at Lehman Brothers, who has a 'buy" rating on Citigroup shares.
"The impact of capital markets wasn't all negative, and they saw solid improvement in credit quality in their commercial business," Glossman added.
Bank of America (BAC), of Charlotte, N.C., the largest U.S. commercial bank, earned $2.15 billion, or $1.23 a diluted share, on an operating basis, up from $374 million, or 21 cents a share, a year ago.
The First Call consensus was for $1.21 a share.
The year-ago figure excludes a one-time pretax charge of $725 million for merger costs, as the bank was born out of the union of NationsBank and BankAmerica last year.
Revenue rose 21 percent to $8.3 billion.
Wall Street titan J.P. Morgan (JPM) earned net income of $442 million, or $2.22 per diluted share, up from $156 million, or 75 cents per share, a year earlier. The third-quarter 1999 results beat analysts' forecasts by 7 cents per share.
The board of J. P. Morgan also said it has authorized the repurchase of up to $3 billion of shares and disclosed plans to boost its quarterly dividend by a penny to $1 a share in December.
Operating revenue rose 59 percent to $2 billion. Revenue from investment banking services rose 30 percent, while revenue in its equity segment almost doubled to $248 million.
Meanwhile, Bank of New York (BK) reported earnings rose to $773 million, or $1.02 per share, from $301 million, or 39 cents per share, a year earlier.
However, the latest results include a one-time after-tax gain of $573 million, or 75 cents per share, related to the sale of its financing unit to General Motors (GM).
Excluding that and other one-time items, Bank of New York reported earnings of 42 cents per share, in line with the consensus analysts' estimate.
Shares of Bank of New York, which has faced scrutiny of regulators in recent months associated with charges of Russian money-laundering through accounts there, fell 1/4 to 33-5/8 early Monday. 
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