By KERRY GRACE BENN
Bank of America Corp.'s second-quarter income fell 5.5% on higher merger charges and continued credit woes, while Citigroup Inc. swung to a profit, but only because of a gain from splitting off Smith Barney into a joint venture.
Both U.S. banks are still trying to find their footing amid the lingering fallout of the financial meltdown and the global economic downturn that followed. Citigroup, which will soon be 34% owned by the U.S. government, ceded control of Smith Barney to Morgan Stanley to shore up its capital base, while Bank of America rescued Merrill Lynch, inheriting its problems.
Bank of America posted income of $3.22 billion, or 33 cents a share, down from $3.41 billion, or 72 cents a share, a year earlier. The company had 64% more shares outstanding in the most recent period amid its capital-raising efforts. The periods included $829 million and $212 million, respectively, in merger and restructuring charges. In part on those acquisitions, revenue jumped 61% to $32.77 billion.
Citigroup recorded a profit of $4.28 billion on a $6.7 billion gain related to the combination of its Smith Barney brokerage operations with those of Morgan Stanley.
The results masked a 7% revenue drop at its securities and investment-banking operations, while deposits rose 6% during the quarter and operating costs dropped 21% as Citigroup continues its effort to streamline its operations long criticized as bloated. Headcount fell 30,000, or 9.7%, during the quarter.
The bank is still roiling from its mortgage-related securities and the credit crisis. Investors had started to believe the worst was over as losses narrowed last year and the company posted its first profit in 18 months in the first quarter. But woes at Citgroup, which was a leader in creating and marketing some of the exotic securities that have been at the heart of the credit crunch, appear to be far from over.
Source: wsj.com
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