US banks report ‘solid results’ despite hit to revenue

AMERICA’s third and fourth-largest banks have revealed “solid” profits, despite income being hit by the turmoil in Europe and the slowdown at home.

Citigroup and Wells Fargo revealed healthy upturns in third-quarter earnings as bad debts eased, but lower revenue as global economic uncertainty hit lucrative investment banking operations. But the profit figures angered activists as the “Occupy Wall Street” movement spread throughout North America and the UK yesterday.

And while investor reaction to the banks’ results was mixed, the US economy also found some relief as new data showed that industrial output had returned from August doldrums with a rise of 0.2 per cent in September.

Citigroup’s shares rose on higher than expected revenues of $20.9 billion (£13.2bn), though Wells Fargo disappointed Wall Street with a 4 per cent decline in turnover to $19.6bn, despite a 21 per cent increase in third quarter profit to $4.1bn.

Citigroup, the US’s third- largest bank, saw earnings rise by 74 per cent in the third quarter to $3.8bn, but revenues fell 8 per cent when adjusted for a $1.9bn accounting gain.

Although Citigroup’s investment banking and bond trading operations account for a minority of the firm’s business, these divisions took a big hit with declines of 21 and 33 per cent, respectively owing to the debt crisis in Europe and a downgrade of the US government’s credit rating in August.

Wells Fargo’s wholesale banking division saw its profits rise 20 per cent to $1.8bn, but revenues decreased 4 per cent as loan and deposit growth was offset by weakness in fixed income sales and investment banking.

JPMorgan Chase & Co also reported serious declines in investment banking fees when it reported Q3 results last week.

Investment banking and trading make up the majority of earnings at Morgan Stanley and Goldman Sachs, which report later this week. Some analysts even expect Goldman Sachs to report a quarterly loss, only the second since the company went public 12 years ago. Bank of America also reports this week.