Citigroup one of the worst hit banks in the current financial crisis announced a profit of $101 million for the third quarter. This is definitely a reduction from last quarter when the bank had reported profit of $4.28 billion. However last year in the corresponding period the bank had reported a loss of $2.82 billion.

Like the other banks analyzed Citigroup still continues to be plagued by high credit losses. Credit losses were marginally down from $8.4 billion in the second quarter to $8 billion in the third quarter.  Managed credit losses at $11 billion was also down from $11.5 billion in the second quarter. The total credit cost at $9.1 billion in the third quarter was lower than $12.7 billion reported in the second quarter.

The bank’s third quarter revenue increased to $20.39 billion as compared to $16.26 billion in the same period a year ago. Citi had received stimulus from the US government to the tune of $45 billion in fresh capital. US government currently hold about 34 per cent stake in the bank.

Citi continues to be popular with its customers as can be seen from the deposit growth of $28 billion in the third quarter from second quarter. As of the end of third quarter, the bank has a deposit base of $833 billion.

Looking forward the bank is focused on sustainable profitability and growth, repaying TARP and providing support in America’s economic recovery.

Bank of America

Bank of America was also impacted by rising losses from consumer and commercial loans. Despite impressive trading and investment banking revenue, the bank announced a third quarter loss of $1 billion. On the positive side the bank’s revenue was higher than last year, motivated by noninterest income growth. Revenue net of interest expense on a fully taxable-equivalent basis increased by 32% to $26.4 billion from $19.9 billion a year ago.

The bank’s non interest income helped by higher trading account profits, investment and brokerage services fees and investment banking income increased to $14.6 billion from $8.0 billion a year earlier. In third quarter provision for credit losses at $11.7 billion though less than the second quarter was $5.3 billion higher than the same period last year.

Segment-wise, deposits net income declined by 49% from 2008 to $798 million. The credit card business also registered a net loss of $1.04 billion from $167 million in the previous year indicating that credit costs continues to be a cause of concern.

Net losses also widened in the Home Loans and Insurance segment to $1.63 billion from last year’s $54 million as credit costs continued to increase. Global Banking net income at $40 million saw a steep decline from $1.02 billion in the prior-year quarter.

Global Markets which had registered a loss of $588 million in the prior-year quarter saw an increase in net income to $2.19 billion thanks to the addition of Merrill Lynch and a favourable trading environment. Global Wealth and Investment Management also saw an increase in net income to $271 million from $80 million a year ago.

In conclusion for these banks some strategies clicked and some didn’t. Overall revenue growth was mainly propelled by non interest income .High credit costs still continues to be a cause of concern indicating that the factors that plunged the economy into recession are still very much at play.

Read more at: One Year Since The Crisis- High Credit Cost Continues To Plague The Banking Sector – Part II

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For JP Morgan Q3 financial result was a mixed bag. Investment bank and retail banking helped the bank report an increase in third-quarter profit. The bank’s Card Services and Consumer Lending segments however had a bad phase with the credit costs continuing to be high.

The bank has proved to be one of the best banks to weather the current crisis. In June the bank paid back the entire $25 billion assistance it had received under TARP.

Third quarter net earnings of the bank increased to $3.59 billion from $527 million last year. Net revenue for the quarter increased by 81% to $26.62 billion from $14.74 billion in the corresponding period last year. As expected the credit losses for the quarter increased by 40% to $8.1 billion from $5.8 billion last year.

Segment wise Investment Banking unit had the best performance with revenue increasing by 85% to $7.5 billion. The unit generated third-quarter net income of $1.9 billion. There was a 4% increase in investment banking fees to $1.7 billion while fixed Income markets revenue increased by $4.2 billion to $5.0 billion. From last year revenue declined in Equity Markets by 43% to $941 million.

Other units of the bank also registered healthy growth. With a net income of $1 billion retail banking unit of the bank registered an increase of 44% in net income vis-a-vis the same quarter last year. As expected the provision for credit losses increased to $208 million in the third quarter vis-a-vis $70 million in the prior year.

The bank’s financial performance to a great deal was brought down by the Consumer loan unit which registered a net loss of $1.0 billion. The unit had registered net loss of $659 million last year. This was more or less expected given the high credit costs with the provision for credit losses increasing to$3.8 billion from $2.0 billion last year. The revenue of this unit however increased by 72% to $3.6 billion helped by higher mortgage fees and related income.

Like the consumer loans unit credit card unit was also plagued by high credit costs and reported a net loss of $700 million in the third quarter. Higher provision for credit losses was mainly responsible for this loss.
Both commercial banking and asset management registered increase in revenue. Net income in the Commercial banking unit increased by 9% in the quarter to $341 million. Net revenue registered an increase of 30% to $1.5 billion. Asset Management net income showed a healthy increase of 23% to $430 million from third quarter of 2008.

Read more at: One Year Since The Crisis- High Credit Cost Continues To Plague The Banking Sector – Part I

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Gold Man Sachs

A year after receiving government aid, Goldman Sachs Group had an impressive third quarter with profits of $3.19 billion , or $5.25 a share up from $845 million, or $1.81 a share, a year earlier. Overall the bank doubled its revenue to $12.4 billion from $6.04 billion last year. In spite of having a record level of capital the firm managed an impressive return on equity of 21.4% compared with 7.7 percent in the third quarter of 2008.

Segment wise the bank registered strong performance in its fixed-income, currency and commodities business. Revenue in these segments more than tripled to $5.99 billion from $1.60 billion in last year’s third quarter. Revenues from Equities also increased to $2.78 billion from $1.56 billion. Another unit of the bank principal investments which includes the firm’s stakes in other companies registered a profit of $1.26 billion as against loss of $453 million last year. However it is not all rosy yet for Goldman. There was a 31% drop in investment-banking revenue to $899 million from $1.29 billion in the third quarter of last year. Bank officials have attributed this mainly to a decline in debt underwriting.

In the current scenario of economic slowdown the firm is operating as if nothing is wrong. The firm particularly has come under criticism for its bonus amount. Compensation amounting to $5.35 billion in the third quarter made up around 43 percent of its revenue and is the bank’s single biggest expense. The bank has earmarked $16.71 billion for bonuses which will be paid out in early 2010.The firm’s 31,700 employees are all set to earn an average of about $700,000 in 2009, a record for the 140-year-old firm.

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Banks that failed last week include BankUSA, Citizens National Bank, Madisonville State Bank, North Houston Bank, Pacific National Bank, Park National Bank, San Diego National Bank, Community Bank of Lemont and the Los Angeles-based California National Bank. California National Bank is in fact the fourth-largest US bank failure this year. Among the failed banks it is also one of the largest bank by branches operating as many as 68 branches across Southern California with more than $7 billion in assets.  Till date Washington Mutual with an asset base of $307 billion is the largest institution to fail in the current financial crisis.

All the nine banks that were held by FBOP Corp have now been taken over by US Bancorp which has in total has taken up more than $18.4 billion in assets and $15.4 billion of deposits. Distressed banks which were owned by FBOP are being taken over by US Bancorp. FBOP is a private group that owns banks in Texas, Illinois, Arizona and California with a total asset base of over $18 billion.

As of now the distressed banks will continue to operate as normal. However these banks will soon be re-branded US Bank, which is the California-focused unit of US Bancorp. US Bank operates a network of more than 770 branches across Illinois, Arizona and California. The future of employees of these nine banks however is uncertain with no official comment yet on their future.

Like all other banks the problem for these banks started with the recent credit boom that ignited the banks’ appetite to extend loans, many of them were not even properly evaluated with regard to credit worthiness and many of them were poorly underwritten. More banks are in for bad times as the banking industries continue to battle the problem of bad loans that continues to plague the sector. According to Federal Reserve data, as of September banks in total held around $1.7 trillion in commercial real estate loans which amounts to 15 percent of their total asset base. The smaller banks are likely to be impacted more if these loans go bad. The large banks with their well diversified asset base can still survive these hard times.

Other banks that analyst foresee to be in distress are Salt Lake City’s Zions Bancorp, Columbus, Georgia’s Synovus Financial Corp and Dallas-based Comerica Inc.  U.S. Bancorp had earlier taken over Downey Savings of Newport Beach and PFF Bank & Trust of Pomona in addition to taking over 20 Nevada branches from BB&T Corp.

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