Two more major banks provided updates on Friday about the fragile state of the economy. One shows signs of a problem and the other takes advantage of situations that are hurting other companies in the same industry.
Wells Fargo reported second-quarter earnings, revealing an increase in allowance for doubtful accounts, a write-down of investments and a slowdown in mortgage activity. Citigroup’s second-quarter report showed some of the same pressure, but unlike Wells Fargo, JPMorgan Chase and Morgan Stanley, which released their latest financial results on Thursday, more than analysts expected. I was able to generate much greater profits.
“There is no data to show that the United States is on the verge of recession,” Citi CEO Jane Fraser told analysts in a post-earning conference call. “The recession can certainly happen, but it’s unlikely to be as serious as the others we’ve seen.” Bank stocks outperform other banks’ profits, 9% in early transactions. It has soared above.
Citi’s latest quarterly profits were down 27% from a year ago to $ 4.5 billion, much better than the market expected. Citi’s customers spent 18% more on their credit cards this quarter than they did a year ago. In addition, Citi’s credit card loan share, which had been overdue for more than three months despite increased spending, fell slightly from a year ago.
Revenues from the fixed income and commodities trading business surged 31%. According to the company, the world’s largest transaction and payment processing sector was the best quarter in the last decade.
Still, there were early signs of a potential problem. Banks have secured $ 1.3 billion to cover bad debt, and Citi, like JP Morgan, said it would suspend share buybacks. Citi’s fees for merger advice and underwriting of shares and fixed income decreased by almost 50% year-on-year.
“We are worried about inflation. We are worried about the recession. Citi Chief Financial Officer Mark Mason said in a phone call with reporters. The bank also operates in Russia. Is in the process of being sold, Mason estimates that it will cost $ 2 billion.
Wells Fargo reported on Friday that second-quarter earnings were lower than analysts expected, and that shortfall was partly due to nearly $ 600 million in venture capital and private equity investment portfolio hits. Announced that there is. Mike Santomasimo, the company’s chief financial officer, said in a phone call with reporters that the loss was a long-held investment in the company and had to be assigned a low rating when the stock market fell. rice field.
Wells Fargo earned $ 3.1 billion this quarter, 48% less than the same period last year and 15% less than the previous quarter of this year.
Banks also explained the slowdown in the mortgage business and lower investment banking fees. Despite adding $ 580 million to the allowance for doubtful accounts, individual and corporate customers have yet to keep up with loan payments, he said. Santo Masimo said executives are preparing for various scenarios, but recognize that “things will probably get worse.”
