B of A, Citigroup earnings rise on consumer banking

Thursday, Oct. 14, 2004 | 11:19 a.m.

STAFF AND WIRE REPORTS

Citigroup Inc. and Bank of America Corp. boosted third-quarter profit as lending to individuals rose and fees from consumer banking increased.

Net income at Citigroup, the world's biggest bank, jumped to a record $5.31 billion, or $1.02 a share, the New York-based company said in a statement. Earnings at Bank of America, the No. 3 U.S. bank, increased to $3.76 billion, or 91 cents a share, the Charlotte, N.C.-based bank said.

Citigroup's profit increased 13 percent as it set aside less money for bad loans, while mortgage lending and credit card spending gained. Bank of America profit soared 29 percent after it added more checking accounts and collected higher fees from credit cards and consumer lending following its purchase of FleetBoston Financial Corp.

Citibank has 12 branches in the Las Vegas Valley and 160 employees. It also operates a 320,000-square-foot credit card processing center in the Las Vegas area with nearly 2,000 employees.

"Both companies get over 50 percent of their earnings from the consumer side and that's been a strength," said Mark Batty at Pittsburgh-based PNC Advisors, who helps manage $51 billion, including 13.7 million Bank of America shares and 5.9 million shares of Citigroup. "They key for them now will be how well they can control their expenses and prepare for slower growth."

Profit in Citigroup's consumer unit rose 23 percent to $3.1 billion. Credit card profit rose 29 percent to $1.27 billion.

The company's global corporate banking business earned $1.45 billion, a 7 percent rise. Equity trading revenue declined 14 percent to $490 million and debt underwriting rose 13 percent to $557 million. The division, which includes the firm's trading and investment banking businesses, had a revenue increase of 1 percent.

Citigroup took $833 million pretax out of loan-loss and tax reserves in the quarter. That consisted of $436 million for fewer problem loans in its consumer unit, a $147 million gain from the completion of a tax audit and $250 million for fewer bad loans in its corporate and investment banking business, the company said.

The company was expected to earn $5.2 billion, or 99 cents a share, according to the average estimate of 16 analysts surveyed by Thomson Financial. Merrill Lynch analyst Guy Moszkowski said his estimate of $1.01 a share didn't include the gains from money released from reserves.

The profit this quarter contrasts with the prior period, when Citigroup's earnings tumbled 73 percent to $1.14 billion, or 22 cents a share, after the company set aside $4.95 billion to cover litigation related to WorldCom Inc. and other companies that sought bankruptcy.

Citigroup earned $4.7 billion, or 90 cents, in last year's third quarter.

Bank of America's revenue increased 28 percent to $12.7 billion, less than the $13.3 billion average estimate of nine analysts surveyed by Thomson Financial. Fee income rose 10 percent to $4.9 billion and lending income increased 36 percent to $7.84 billion.

The company set aside $650 million for bad loans, little changed from a year ago. It wrote off $719 million in bad loans, a 7.3 percent decline.

Bank of America has 52 Las Vegas-area branches and has about 2,000 local employees. Last year the company launched a plan to open 19 new branches in three years. Bank of America officials said they are about half way to reaching that goal.

Net income in the New York-based global corporate and investment bank, which includes Banc of America Securities LLC, rose 9.1 percent to $475 million. The company gained market share in underwriting bonds, syndicated loans and equity-linked offerings in the United States during the third quarter from a year ago, according to data compiled by Bloomberg News.

Investment banking fees rose 6.3 percent to $438 million.

Consumer and small business banking had $1.68 billion in net income, little changed from a year earlier. The company recorded a $250 million loss in mortgage banking income in the quarter compared with a gain of $666 million a year earlier.

Profit from commercial banking more than doubled to $824 million.

Bank of America's wealth and investment management unit earned $469 million, 83 percent more than a year earlier. Fees from investment and brokerage services rose 59 percent to $945 million.

Bloomberg News and Sun business writer Kevin Rademacher contributed to this report.