Citigroup, the third largest bank in the United States, recovered from a 27 cents loss per share in the last year to a profit of 7 cents per share the second quarter this year. Year earlier the loss was $3.2 billion for share holders and third quarter earns $2.2 billion profit this year
Although the profit was slightly lesser than that of the second quarter but was higher as of the last year’s. Bank also had to consult revenues to nullify bad loans, which bank said was due to the depression in fixed income trading.
As the earnings were greatly helped by releasing the revenue, analysts point this as “low quality” earning. They also doubted that it was very difficult for banks to keep the upward slope in profit when loan demand are going downward and losses are heading upwards.
Revenue fell short of the expectations and experts points out that may further decrease as the foreclosure problems increases, but the good news in this quarter was higher than expected profit for Citigroup Inc.
Bank, however claims that their mortgage procedures are reasonable and they have not found any issues so far as the foreclosure problem rise. Mike Holland told that Citigroup however, indicates that the problem is well under control, but they should clearly give some directions to support their claim.
Matt McCormick, Bahl & Gaynor Investment Counsel Inc’s portfolio manager told that banks are now having serious hurdles in increasing their revenues. He also added that it can’t go forever that banks keep digging out the loan loss reserves. Industrial rival JP Morgan also went on the same road to beat earning expectations by digging out the loan loss reserves into play.
John Gerspach, chief financial officer Citigroup told that they wouldn’t see the loan shrinkage as before, referring to a 5.5 dip in consumer loans, however corporate loans get higher.