2 Financial Firms’ Profits Beat Forecasts
NEW YORK — Citigroup Inc., the world’s biggest financial services company, and BankAmerica Corp., the No. 1 U.S. bank, on Monday reported first-quarter earnings that beat analysts’ expectations as rising markets have kept profits above those of the nation’s industrial giants.
Citigroup’s profit from operations rose 12% to $2.42 billion, or $1.04 a share, beating the 87 cents forecast in a First Call Corp. survey of analysts.
BankAmerica’s profit fell 3% to $1.91 billion, or $1.08 a share. Analysts had expected it to earn $1.03 a share, however.
Both companies, formed in mergers last year, are earning more than manufacturers that once dominated U.S. corporate earnings, such as General Motors Corp., the world’s leading auto maker.
From the 1950s through the 1970s, financial service company profits made up from 10% to 15% of overall U.S. corporate earnings; they are now at 16%, said Bruce Steinberg, chief economist at Merrill Lynch & Co.
Manufacturers generated about half of U.S. profits from 1929 through the 1950s. By 1998, he said, their share had slipped to 26%.
“You can’t assume that because [financial firms] surpassed the industrial giants, there was some fundamental change in the economy,†said Roy Smith, professor of investment banking at New York University and a former Goldman Sachs & Co. partner. Mergers simply “created a concentration of power and economic control.â€
Citigroup shares fell $1 to close at $70.63 amid a broad market decline. BankAmerica fell $1.25 to close at $71.75. Bank of New York Co., which reported earnings that met estimates, rose 13 cents to close at $37.69. All trade on the New York Stock Exchange.
Citigroup said first-quarter profit jumped as a booming economy and rising markets boosted consumer banking, insurance and securities trading. Net income after a $74-million charge was $2.36 billion, or $1.01 a share.
Profit exceeded that at all other financial services companies and was more than General Motors’ first-quarter profit from operations of $1.37 billion and net income of $2.06 billion.
Charlotte, N.C.-based BankAmerica said first-quarter profit fell 3%, hurt by lower margins on loans and a decline in investment-banking revenue.
In its third quarterly earnings report since the merger of NationsBank Corp. with BankAmerica, the bank said net income fell to $1.91 billion, or $1.08 a share, from profit before a charge of $1.97 billion, or $1.11, last year.
Inside the business of entertainment
The Wide Shot brings you news, analysis and insights on everything from streaming wars to production — and what it all means for the future.
You may occasionally receive promotional content from the Los Angeles Times.
