Profits surge for Citigroup, Bank of America in Q1

Like its major Wall Street competitors, Citigroup was able to release billions from its loan-loss reserves this quarter, which directly benefited its bottom line. The big banks collectively set aside tens of billions of dollars a year ago to cover the potential losses they might incur as the economy nosedived in the early months of the pandemic. Now that the economy is recovering, banks are able to release those funds.

Citi had a $3.85 billion one-time gain from releasing its loan-loss reserve, which the bank said “reflects the improving economic outlook.”

Citigroup saw lower revenue and interest income in its global banking division, as its customers more aggressively paid down their debts in the past year during the pandemic. Citi has a substantial credit card business that leans toward “revolving” customers — those who keep a steady balance on their cards — and a significant chunk of Americans used their government stimulus payments to pay down debt. Revenues from credit cards fell 18% from a year ago.

Citi’s investment banking division had a strong quarter, albeit not as strong as its competition at JPMorgan Chase and Goldman Sachs. Revenues across the division were up 5%, helped by a jump in revenues from its stock trading department.

Part of that revenue gain in the investment bank came from the growing interest in SPACs, or special purpose acquisition companies, which have become a popular way for companies to go public. Citi has underwritten several SPAC initial public offerings.

In a separate announcement, the bank said it would be slimming down its global consumer banking franchise to focus on four geographic markets: Singapore, Hong Kong, the United Arab Emirates and London. The change does not impact the company’s U.S. consumer banking operations.

Citi has historically had a large consumer banking presence outside the U.S., but it tends to dabble in markets instead of dominating in them. The scaling back is partly to give Citi leverage and focus in the markets it says it sees as best for future growth.

Bank of America’s profits doubled in the first quarter, the bank said Thursday, as the improving economy allowed it to release billions from its loan-loss reserves that it originally set aside in the early days of the pandemic.

Bank of America is the latest of the big banks to say it has released billions from its reserves, following JPMorgan Chase and Wells Fargo, which announced results Wednesday. The release of reserves helped both of those banks’ profits soar compared to the year-ago first quarter.

The Charlotte-based banking giant earned $8.1 billion in the quarter, equal to 86 cents per share, compared to a profit of $4.01 billion, or 40 cents a share, in the same period a year earlier. Analysts were looking for BofA to earn 66 cents a share.

The bank had a net one-time gain of $1.86 billion for releasing loans from its loan-loss reserves.

Like JPMorgan Chase and Goldman Sachs, which also reported its results on Wednesday, BofA had a strong quarter in its investment banking division. Total profits in the division rose to $2.05 billion from $1.71 billion in the same period a year earlier. The bank saw revenue gains on its trading desks, a reflection of the healthy volatility the markets had last quarter.

One thing that negatively impacted BofA and hurt the other banks as well in due time is low interest rates. The bank’s net interest income fell from $12.13 billion last quarter to $10.2 billion in this quarter. BofA’s balance sheet tends to skew toward financial products with a shorter duration, so more of the bank’s balance sheet changed to lower interest rate products than its competition.

Overall revenue at the bank was $22.82 billion, relatively flat compared to the $22.77 billion reported last year.

Shares of Bank of America rose about 1% in premarket trading.