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Bank of America and Citigroup reported declining revenues on Wednesday as lower interest rates and lower lending continued to weigh on global megabankers.
Both lenders reported strong consumer spending following a sharp drop in the loss of the Covid-19 pandemic, but that has yet to translate into loan growth as more people pay balances before banks can get them interest.
Credit card spending on the BofA credit card increased 46% in the second quarter, but the loan balances of this company decreased by 15%. BofA’s second-quarter revenue fell 4% from the same period last year to $ 21.5 billion, less than the $ 21.8 billion expected by analysts, according to FactSet data.
Citi, one of the largest credit card issuers in the United States, reported a 12% drop in total revenue and end-of-period loans fell 3%.
Revenue from its U.S. branded card business, the engine of its global consumer bank’s growth toward the pandemic, fell 12% due to lower volumes.
Banks have also struggled to raise lending since the Federal Reserve cut interest rates to near zero and fiscal and monetary stimulus programs reduced the appetite for new loans.
However, the faster-than-expected economic recovery in the United States has allowed banks to release billions of dollars they had set aside for pandemic-induced loan losses that never came to fruition. Reserve releases helped banks report growing gains despite lower second-quarter earnings and higher spending.
Citi reported second-quarter earnings of $ 6.2 billion, or $ 2.85 per share, compared to $ 1.1 billion or 38 cents per share, a year earlier, after releasing $ 2.4 billion in reserves. Analysts surveyed by FactSet predicted earnings of $ 2.02 per share.
BofA issued reserves of $ 2.2 billion in the second quarter and reported earnings of $ 9.2 billion, or $ 1.03 per share, compared to earnings of $ 3.5 billion or 37 cents per share from the same period last year. Analysts polled by FactSet expected earnings of 77 cents per share.
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