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It’s a new year, but the same old story for beleaguered Citigroup and Bank of America.
Both banks turned in less-than-inspiring fourth-quarter performances — dragged down by mortgage-related woes and other legacy issues — in what is becoming an all-too-familiar tale for shareholders.
Citi fell far short of expectations in its first quarterly report under new CEO Michael Corbat. Like his predecessor, Vikram Pandit, who was ousted in October after five years in the top job, Corbat vowed to boost the bank’s performance while asking for more time.
“We’ve got to get to the point where we stop destroying our shareholders’ capital,” Corbat said during a call yesterday to discuss fourth-quarter results.
The results were marred by more than $2 billion in charges for layoffs and mortgage lawsuits. Profit rose 25 percent, to $1.2 billion, or 38 cents per share. Revenue rose 6 percent, to $18.7 billion.
Excluding accounting charges tied to changes in the value of Citi’s debt, the bank rang up per-share profit of 69 cents. But even by that measure, it missed analysts’ estimates for 97 cents by a wide margin.
The disappointing results drove the stock down nearly 3 percent, to close at $41.24.
Similarly, Bank of America was one of the worst performers in the Dow Jones industrial average yesterday, dropping 4.24 percent, to close at $11.28.
The bank, run by CEO Brian Moynihan, said net income dropped to $732 million, or 3 cents a share, from $1.99 billion, or 15 cents, a year earlier.
Moynihan, who is trying to unwind the hodgepodge of mergers engineered by predecessor Ken Lewis, said he’s happy with the bank’s progress. In particular, BofA is paying billions to settle issues tied to its acquisition of subprime lender Countrywide Financial.
While investors are hopeful that the bank is close to putting Countrywide behind it, Moynihan still faces questions about whether he can boost revenue.
In the recent quarter, lending revenues fell 25 percent, to $18.7 billion, down from $24.9 billion a year ago.
Like Citi, BofA was hit with costs stemming from mortgage lawsuits and liabilities. That included $2.5 billion for its share of an $8.5 billion settlement over foreclosure abuses, and $2.7 billion for agreements with Fannie Mae over soured loans.
Clearly, some investors believe that BofA has turned a corner, driving the stock up 75 percent over the past year.
“We’re far past the peak on that. I think we’re starting to see it wane,” Joshua Rosner, an analyst with Graham Fisher & Co., told Bloomberg News. “The legacy issues are being slowly put behind them.”
Still, both banks may have to uncover fresh areas of growth as the mortgage finance boom wanes. Citi’s Corbat described the pace of the mortgage market as “slowing.”
“It’s slowing in terms of the mortgage refinance boom, and slowing as far as the economics associated with that,” he told analysts.