Citigroup (C), Bank of America (BAC) post strong Q2 profit growth

Summary 

• Bank of America’s second-quarter net income more than doubled to US$9.2 billion.
• Citigroup’s net income soared to US$6.2 billion from US$1.1 billion.
• Banks of America’s stock declined, while Citigroup gained when the market opened on Wednesday

Citigroup Inc. (NYSE: C) and Bank of America (NYSE: BAC) posted significant growth in their second-quarter profit on July 14.

The American banks saw their earnings multiply despite the decline in revenue. Following the improving economic outlook, the companies released the significant credit reserves, which they had set aside for potential loan losses last year.

Banks of America’s stock declined, while Citigroup’s stock popped when the market opened on Wednesday. As of 9:32 am ET, Bank of America shares were trading at US$39.32, down 1.35 percent. Citigroup shares gained 2.68 percent to US$70.20.

Bank of America’s market capitalization totals US$341.57 billion. Its stock returned 31.51percent year to date and has a P/E ratio of 17.06.  The shares traded between US$22.95 and US$43.49 in the last 52 weeks.

Citigroup has a market capitalization of US$145.32 billion. The stock returned 10.88 percent year to date and shares traded in the range of US$40.49 to US$80.29 in the last 52 weeks. It has a P/E ratio of 9.37.

READ MORE: JP Morgan, Goldman Sachs start earnings season with strong Q2 results

Bank of America doubles Q2 profit

Bank of America saw its second-quarter net income more than double to US$9.22 billion, or US$1.03 per diluted share, from US$3.53 billion, or US$37 cents per share in the year-ago period.

The bank benefited US$1.6 billion from the provision for credit losses as it released US$2.2 billion of credit reserves.

However, revenue, net of interest expense, declined 4 percent year over year to US$$21.58 billion. Net interest income fell 6 percent to US$10.23 billion because of low interest rates while and noninterest income decreased 2 percent to US$11.23 billion over lower sales and trading revenue.

The consumer spending significantly exceeded the levels prior to the pandemic, said Chairman and CEO Brian Moynihan. He also noted that deposit growth is strong and loan levels have started to grow.

Also, Bank of America reported that its noninterest expense during the quarter grew by US$$1.6 billion, which includes higher compensation and benefits costs, and ESG contribution.

In its first quarter, Bank of America had reported a net income came of US$8.1 billion on US$22.8 billion revenue.

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Citigroup Q2 net income balloons

Citigroup posted a net income of US$6.19 billion, or US$2.85 per share, in its second quarter, against the net income of US$1.06 billion, or 38 cents per diluted share, in the year-ago quarter.

Citigroup benefitted US$1.1 billion in cost of credit during the quarter, compared with the US$8.2 billion credit cost in the same quarter previous year.

CEO Jane Fraser said the pace of the global recovery is exceeding its expectations, and consumer and corporate confidence is rising.

Meanwhile, revenue fell 12 percent to US$17.47 billion from US$19.77 billion in the second quarter of 2020.

The revenue decline was primarily attributed to the drop in fixed income markets and corporate lending in its institutional clients group, as well as to lower average card loans and deposits in its global consumer banking division.

Operating expenses also grew 7 percent year over year during the quarter to US$11.2 billion.

READ MORE: Citigroup to Exit Consumer Business Franchises in 13 Asia, EMEA Markets

The New York-based bank had reported a net income of US$7.94 billion and US$19.33 billion in revenue during its first quarter.

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