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Citigroup And Bofa Report Profits, Aided By Asset Sales

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http://www.nytimes.com/2009/07/18/business...tml?_r=1&hp

Bank of America and Citigroup, giants that have come to symbolize the troubles plaguing the nation’s banking industry, announced Friday that they were once again turning handsome profits.

Bank of America reported a $3.2 billion profit for the second quarter. Citigroup said it earned $4.3 billion during the period.

But behind the figures was a sober reality: Those happy results were driven by billions of dollars in one-time gains — in the case of Bank of America, by a profit from the sale of a stake in a big Chinese bank and, in the case of Citigroup, by a bonanza from a new joint venture for its Smith Barney division.

Without those one-offs, the banks, despite two taxpayer-financed bailout dollars apiece, would have lost billions.

Like Goldman Sachs and JPMorgan Chase, which stunned Wall Street earlier this week with robust earnings reports, Bank of America and Citigroup got big increases from their trading operations.

But the pain being felt by hard-pressed American consumers hurt these giants even more. Both banks set aside billions of dollars to cover looming losses on consumer loans and warned that, given the tough economy, the road ahead could be rocky.

Still, the results exceeded analysts’ expectations. Bank of America announced earnings of 33 cents a share, and Citigroup reported earnings of 49 cents a share. The results at Citigroup far outstripped the loss of 18 cents a share that analysts had predicted.

But both banks — the last of the big lenders that have yet to pay back their emergency bailout money from the federal government — sold significant assets during the quarter, cushioning their bottom lines. Bank of America’s results were enhanced by the $5.3 billion pretax gain from the sale of shares in the China Construction Bank. Citigroup formed a joint venture with Morgan Stanley for Smith Barney, resulting in an $11.1 billion pretax gain.

While the results provided another sign that American banking industry is stabilizing somewhat faster than many had expected, they nonetheless underscored how the sagging consumer economy is hurting banks big and small. For the moment, trading and other traditional Wall Street businesses, such as securities underwriting, are generating profit at many big institutions.

At Bank of America, a record trading profit of $6.7 billion and a pickup in investment banking fees lifted net revenue to $33.1 billion, up from $20.7 billion a year ago.

Bank of America also reported that it increased its capital buffers by nearly $40 billion by issuing stock and selling assets in a sign that it is preparing to absorb losses in its commercial and consumer loan businesses. Federal officials told the bank in May to raise at least $33.9 billion following stress tests conducted by bank examiners. Citigroup was told to raise $5.5 billion.

So without asset sales losses would be in the billions and this is described as the US banking sector stabilising!!! :blink::blink:

If the losses continue to mount and they no longer have assets to sell what then?

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