NEW YORK (Reuters) -
Citigroup Inc. and Bank of America Corp. posted double-digit gains in third-quarter profit on Thursday, driven by gains in consumer banking.
Profit at Citigroup, the world's largest financial services company, rose 13 percent to $5.31 billion, while profit at Bank of America, the No. 3 U.S. bank, jumped 29 percent to $3.76 billion. Retail businesses such as branch banking and credit cards generated more than half of revenue at both.
Shares in Citigroup (down $0.59 to $43.52, Research) fell 1.4 percent while Bank of America (down $0.83 to $44.18, Research) shares lost 1.9 percent in afternoon trade on the New York Stock Exchange.
"The consumer was awesome, the standout in the quarter," said Wayne Bopp, an analyst for Fifth Third Investment Advisors, referring to gains in retail banking, credit cards and consumer finance. Fifth Third's $35 billion of assets includes shares in both banks.
"Bankruptcies are down, deposit growth and credit card income is strong, and delinquencies are down."
But bank stocks in general declined Thursday. The Philadelphia KBW Bank Index fell 1.4 percent.
Citigroup
New York-based Citigroup said net income totaled $1.02 per share, up from $4.69 billion, or 90 cents per share, a year earlier.
Analysts polled by Reuters Estimates on average estimated 99 cents per share, with a range of 97 cents to $1.03.
"Citigroup consistently demonstrates that its global franchise can deliver on many fronts," said David Katz, chief investment officer of Matrix Asset Advisors Inc. in New York, whose $1.4 billion of assets include Citigroup shares.
Revenue rose 6 percent to $20.5 billion but was down 8 percent from the second quarter and fell short of analysts' average estimate of $21.7 billion. Expenses rose 12 percent.
About 58 percent of quarterly profit came from consumer businesses, while 27 percent came from corporate and investment banking. Consumer profit rose 23 percent to $3.07 billion, with gains of 15 percent in retail banking, 29 percent in credit cards and 35 percent in consumer finance.
Some of Citigroup's results came from a release of $686 million from reserves because loan quality improved. Citigroup has $1.44 trillion of assets.
Chief Executive Charles Prince is expanding Citigroup's global franchise through small purchases, but on a conference call lamented some of its recent struggles.
In September Japanese regulators ordered Citigroup to close its private bank in that country. And the bank has apologized for a $13 billion August bond trade that roiled European markets.
"When things happen that cause (our) legacy and history to be tarnished a little bit, it hurts all of us. It hurts me personally," Prince said. "Examples like that are simply not acceptable, and we're taking very strong action."
Bank of America
Charlotte, North Carolina-based Bank of America Corp. said net income totaled 91 cents per share, as analysts expected. It earned $2.92 billion, or 96 cents per share, a year earlier.
Profit per share fell because Bank of America issued shares to buy FleetBoston Financial Corp. for $48 billion in April. The company also recently conducted a 2-for-1 stock split.
Revenue rose 29 percent to $12.6 billion, as lending income rose 45 percent to $7.7 billion and fee income rose 10 percent to $4.9 billion.
Bank of America, with $1.09 trillion of assets, added a net 624,000 savings accounts and 537,000 checking accounts, and 1.6 million credit card accounts, but suffered a $250 million loss in mortgage banking.
In an interview, Chief Financial Officer Marc Oken said the bank benefited from "continued good, steady growth in the consumer arena." He also said commercial credit quality is "as good as it gets," but may weaken slowly.
Chief Executive Kenneth Lewis wants to expand Bank of America and simultaneously cut costs. The bank cut 2,500 jobs last quarter and is eliminating 17,000 overall, but is spending $600 million to beef up its investment bank.
Four big regional banks -- Cleveland's National City Corp. (down $0.35 to $37.99, Research), Winston-Salem, North Carolina's BB&T Corp. (down $0.73 to $38.76, Research), Cincinnati's Fifth Third Bancorp (down $0.72 to $49.02, Research), and Cleveland's KeyCorp (down $0.05 to $31.50, Research) -- also posted higher quarterly profits on Thursday.
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