US banks beat Wall Street forecasts

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The Independent Online

Citigroup and Bank of America continued the bounce back of US banks yesterday, both following JP Morgan in beating Wall Street's earnings expectations.

Citigroup, one of the worst performers in the credit crunch, reporting net income of $2.7bn (£1.8bn).

The money made by the bank, which remains in hock to the US government, was down 37 per cent from a year ago and 39 per cent from the first three months of the year.

However, last year's results were fattened by a $6.7bn one-off gain from the sale of a majority stake in the bank's brokerage operation to Morgan Stanley. Revenues were also on the decline, coming in at $22.1bn, down $3.4bn, or 13 per cent from the first quarter of 2010.

The bank is busily shedding surplus assets and said loan losses had fallen for the fourth consecutive quarter. The chief executive, Vikram Pandit, said: "Although economic conditions remain challenging and global regulatory frameworks are uncertain, we believe these results demonstrate that the difficult decisions made by our management team have put in place all the elements for sustained profitability."

Meanwhile, Bank of America, which owns Merrill Lynch, said it had made a profit of $3.1bn and, like Citigroup, benefited from improving trends in consumer credit which allowed the banks to cut provisions. However, its profits were still down on the $3.2bn it made a year ago.

The Bank of America-Merrill Lynch chief executive, Brian Moynihan, said the company's experts did "not believe that there will be a double dip" or that the US economy would slip back into recession.

Despite the results and Mr Moynihan's upbeat view of the American, economy both banks' shares fell as analysts spotted that their loan books were shrinking. This led to concerns that volatile markets and economic concerns were keeping borrowers away, and raised fears about consumer spending.