The quarterly figures from JP Morgan also met with little enthusiasm among investors. The two major American banks have made billions in profits.
Dhe major American banks Citigroup and Bank of America on Thursday provided a bit of a contrast to their competitors Goldman Sachs and JPMorgan, who shone on Wednesday with very good quarterly figures. Citi and Bank of America also benefited from the stock market boom and the prospect that the American economy will grow this year by more than 6 percent thanks to government economic stimulus and a high vaccination rate, as it did in the 1980s. But Citigroup in particular also announced cuts.
Due to the better economic outlook, since the second half of 2020 all American banks have been able to release part of the many reserves that they put aside a year ago due to the increasing likelihood of loan defaults due to the pandemic. That benefits profits and continues this year. “The start of the year was better than expected and we are confident about the economic development,” said the new Citi boss Jane Fraser.
Citigroup tripled its profit in the first quarter compared to the same quarter of the previous year to 7.9 billion dollars (6.6 billion euros). Bank of America also delivered good numbers at first glance. Their profits doubled to $ 7.6 billion in the first quarter. However, the previous day JPMorgan had reported a five-fold increase in profit of $ 14.3 billion, and the smaller investment bank Goldman Sachs made $ 6.8 billion more than ever.
Citi benefits from the Spac boom
Similar to JPMorgan and Goldman Sachs the previous day, Citigroup and Bank of America also showed rising revenues in investment banking. Citi took a whopping 46 percent more in fees in the capital markets business and benefited from its role as an advisor and placement assistant, particularly at Spacs. These are empty wallets with no operational business that are brought to the stock exchange and only then filled by the acquisition of an as yet unknown company. Investors are practically tearing these Spacs out of the sellers’ hands.
Bank of America’s bond dealers brought in 22 percent more revenue and stock dealers 10 percent more than in the same quarter of the previous year. However, the strong capital market business could not cover up other weaknesses of the two banks. The earnings in the entire group at Bank of America (Bofa) remained constant at $ 22.8 billion. Bofa shares lost around 4 percent on Wall Street on Thursday in early trading because investors had promised more credit growth.
At Citi, the concert revenues even fell by 7 percent to 19.3 billion dollars. Analysts commented that this would help Scottish Fraser, who took office as CEO in March, to realign Citigroup right from the start of her term of office.
In fact, Fraser announced cost reductions in retail banking on Thursday. Citi is withdrawing from 13 countries, including China, India, Australia, Poland and Russia. In order to be successful in the competition, the presence of the bank in these countries is too small, explained Fraser. In Germany, Citigroup had already sold its private customer business in 2008 to the French banking group Crédit Mutuel, which has since operated it as Targobank.