News was mixed for the American financial industry today. While the markets as a whole rose sharply, the earnings reports from two major banks revealed two very different stories.
Citigroup Shows Bad Q4
Citigroup (C) saw profits slip some 11 percent in the fourth quarter of 2011 after the company took a serious hit on the bond markets. Citi reported earnings of $1.17 billion, or $0.38 per share, on $17.17 billion in revenue. This was significantly lower than last year’s $0.43 per share and analyst expectations, which a Reuters poll showed to have an average of $0.48 per share.
“Overall, we made solid progress in 2011,” Chief Executive Vikram Pandit said. “Clearly, the macro environment has impacted the capital markets, and we will continue to right-size our businesses to match the environment.”
The earnings slip was driven by Citi’s exposure to potentially toxic debt from troubled European countries. While Citi saw a boost in lending, total exposure to troubled European nations increased another $700 million to $7.8 billion. Chief Financial Officer John Gerspach still expressed confidence in the eurozone, though. “We are not walking away from the eurozone,” he said, even if Europe “remains the largest overhang over the market at this point in time.”
Tuesday also brought news of a shakeup at Citigroup’s North American credit-trading desk as leading debt traders Rohit Bansal and Chris Yanney both departed after Citi announced a new plan to cut staff. News of the revenue slip appears to have hit Citigroup’s stock in the teeth as shares are down almost 6.5 percent in early trading.
Wells Fargo Tells a Different Story
While Citigroup suffered through the volatile European debt market last quarter, San Francisco-based Wells Fargo (WFC) stayed above the fray. Wells Fargo, which is primarily a commercial bank, avoided the pitfalls that have dragged down investment banks and saw its income rise 20 percent year-over-year as a result. Wells Fargo reported net income of $4.11 billion, or $0.73 per share, in the final three months of 2011, up from last year’s $3.41 billion, or $0.61 per share.
Wells Fargo also managed to edge out Street expectations as the average analyst prediction for the quarter saw the bank earning $0.72 per share. Loans were up 2 percent year-over-year, with commercial and industrial loans leading the charge with an 11 percent increase and commercial real-estate lending jumping 6.6 percent. Wells Fargo shares have bounced just over 1.5 percent in response to the positive news.
J.P. Morgan Continues to Slide
J.P. Morgan (JPM), which reported earnings on Friday, continued a slide that has the bank’s shares off by over 4.5 percent since Friday. The bank reported net income in Q4 2011 of $3.72 billion or $0.90 per share, down year-over-year from $4.83 billion or $1.12 per share.