US banking giant Citigroup posted earnings of 2.15 billion US dollars (£1.4 billion) today as the sector's third quarter reporting season continues to beat expectations.
Citigroup - 12% owned by the US government after being bailed during the financial crisis - said profits were helped by a sharp fall in bad debts, with provisions dropping to their lowest level since the second quarter of 2007.
Earnings from the Wall Street firm, which is involved in a high profile court case in New York with EMI owner Guy Hands today, compared with losses of 3.2 billion a year earlier and mark the third straight quarter of profits.
Banking stocks on both sides of the Atlantic cheered the news, which followed better-than-forecast results from JP Morgan last week.
UK bank shares raced as much as 3% higher on increased hopes for a decent set of third quarter figures on this side of the Atlantic.
Part-nationalised Lloyds Banking Group rose 3%, while Barclays gained as much as 2%.
The US earnings season so far confirms the banking recovery remains on track as borrower defaults continue to ease back from the highs seen during the credit crunch.
But a robust third quarter raises fears over a return to sky-high bonuses in the sector, while economies battle to repair their finances caused by the financial crisis and bank bail outs.
Citigroup did not reveal its compensation ratio for the third quarter - a key measure of pay in relation to revenues - but it said the total salary and benefits bill for the period stood at 6.12 billion US dollars (£3.86 billion), up 2.6% on the previous quarter.
The bank's third quarter earnings were 20% lower than the previous three months after a 17% drop in its securities and banking arm profits.
However, JP Morgan also reported a steep fall in investment banking business as the boom in fees seen after the recovery has slowed in recent months.
Citigroup's recovery is also all the more marked, given that it was one of the worst hit in the crisis.
It received 45 billion dollars (£28.3 billion) in government aid, 25 billion dollars (£15.7 billion) of which was converted to stock. The government is still reducing its stake in Citigroup.
The firm is being helped by smaller lower losses from bad loans, down 30% during the third quarter to 7.66 billion dollars (£4.8 billion) as defaults in Citi's retail partner cards, Citi-branded credit cards and real estate portfolios all fell.
The drop in defaults is a signal that consumers are getting back on their feet.
JP Morgan reported a 67% plunge in bad debts, while the market will be waiting for similar trends as other US groups report. Bank of America and Goldman Sachs post figures tomorrow, followed by Morgan Stanley on Wednesday.
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