Citi's profit drops amid tough quarter for banks
The nation's big banks continued to report mixed-to-disappointing fourth-quarter results Tuesday, as Citigroup (C) said profits fell 11 percent and missed Wall Street's forecast. Wells Fargo (WFC), meanwhile, posted a better-than-expected 20 percent rise in income, but revenue slipped 4 percent.
The latest earnings reports confirm what was already widely expected: The fourth quarter was tough for financial firms. JPMorgan Chase (JPM) kicked off bank earnings season last week with what CEO Jamie Dimon called a "modestly disappointing quarter."
As CBS MoneyWatch blogger Alain Sherter notes, the weak economy, loan losses, a drop in deal activity and a slump in trading profits have big U.S. banks facing a growth quandary.
Citigroup's fourth-quarter results showed as much. Turbulent financial markets hurt its investment banking profits, while an accounting rule related to the value of its corporate bonds also dinged results.
A dearth of deal activity meant Citigroup generated less revenue from advising on mergers and acquisitions, while volatile stock and bond markets caused fees from underwriting debt and equity offerings to drop.
In better news, both Citigroup and Wells Fargo benefited from more customers paying their bills on time. As Americans pay down debt, Citigroup's credit card portfolio is improving. The number of customers late with payments by 90 days or more fell 30 percent year-over-year. Losses from loans fell 40 percent, a bigger decline than the bank had anticipated.
At Wells Fargo, the bank reported a sharp drop in writes-offs of uncollectable loans. Wells Fargo wrote off $2.6 billion in uncollectable loans for the most recent quarter, down from $3.84 billion a year ago. Additionally, the bank said its lending business improved, deposits grew and its mortgage business steadied.
However, with Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) slated to report earnings in the days ahead, Wall Street is bracing for more disappointing news out of the financial sector.
The Associated Press contributed to this report.