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Citigroup surprised Wall Street on Friday, reporting a $3 billion second-quarter profit instead of the big loss analysts expected. It joined Bank of America and other big banks in reporting strong results for the quarter.
After paying preferred dividends, the New York-based Citigroup earned $3 billion, or 49 cents per share. It lost $2.86 billion, or 55 cents per share, during the same quarter last year.
Analysts forecast a loss of 37 cents per share for the quarter.
Citigroup recorded an after-tax gain of $6.7 billion on the sale of a majority stake in its Smith Barney brokerage unit. It also said some of its assets that had plunged in value during the credit crisis had recovered somewhat, giving the bank a gain.
Citi has been among the hardest hit by the credit crisis and recession. It has received $45 billion in funds from the government and guarantees to protect against losses on more than $300 billion in risky assets.
Bank of America's earnings were also better than expected. It reported a $2.42 billion second-quarter profit even as losses from failed loans continued to rise.
Bank of America said Friday its earnings after payment of preferred dividends were down at 33 cents per share compared with a profit of $3.22 billion, or 72 cents per share, a year earlier. The earnings beat the forecasts of analysts surveyed by Thomson Reuters, who forecast Bank of America would earn 28 cents per share.
Their revenue forecast, however, was slightly ahead of Bank of America's actual revenue of $33.1 billion.
In a statement, CEO Ken Lewis warned that "continued weakness in the global economy, rising unemployment and deteriorating credit quality" would affect the company for the rest of this year and next. That echoed the view taken Thursday by JPMorgan Chase & Co. executives who also reported continuing loan problems even as their company had strong second-quarter earnings.
Bank of America said its results also reflected a gain from selling part of its stake in China Construction Bank Corp. They also included $713 million of dividend payments tied to a federal bailout, and a charge to bolster a federal deposit insurance fund.
Bank of America, like Goldman Sachs Group Inc. and JPMorgan Chase, said it had a handsome profit from its trading business. Bank of America acquired Merrill Lynch & Co. early this year.
But, like JPMorgan, it did report continuing losses from failed loans. Bank of America said it recorded a $13.4 billion provision for loan losses during the second quarter as consumers struggled with debt amid rising unemployment.
The company also said its mortgage revenue rose following its acquisition of lender Countrywide Financial Corp., reflecting the refinancing boom triggered by lower mortgage rates.
During the quarter, the government told Bank of America it needed to raise $33.9 billion in additional capital to strengthen its finances in the event of a further deterioration in the economy. By late June, the bank had raised $38 billion.
The bank has received $45 billion in bailout funds as part of the Treasury Department's $700 billion financial rescue package. It's not known when it will repay the government.
This program aired on July 17, 2009. The audio for this program is not available.
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