Profit levels at the retail banking
divisions of some leading US banks have been hit by worsening
credit losses. Bank of America, for instance, the country’s largest
retail bank,said that while overall second-quarter group profits
have risen 5 percent year-on-year to $5.76 billion, bigger credit
losses helped push consumer and small business banking profit down
23 percent to $2.46 billion.
The bank said it had set aside $1.81
billion for credit losses, up 80 percent from a year earlier, while
net charge-offs rose 46 percent to $1.5 billion. “Bank of America,
with its diverse business model, was able to continue attractive
earnings growth despite challenging headwinds,” said CEO Kenneth
Lewis.
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Total sales of retail products for the bank rose 8 percent, driven
in particular by sales of first-time mortgages, checking and
savings accounts, credit cards and online banking activations. Net
new retail checking accounts rose by 717,000. Keep the Change, Bank
of America’s debit card-based savings tool, passed the mark of 5
million customers – and more than $500 million has now been saved
by customers.
JPMorgan Chase also said it had faced tougher retail banking
conditions: its retail financial services division, which includes
home loans, credit cards and auto financing, reported $785 million
in net income, down 10 percent from a year ago. The bank, which
said it set aside $1.53 billion for loan losses, up from $493
billion in the year-ago quarter, reported overall net income of
$4.2 billion compared with $3.5 billion in the year-earlier
period.
US Bank, the country’s sixth-largest banking group, also reported
weaker figures. Second-quarter net income for the company fell to
$1.16 billion from $1.2 billion a year earlier. CEO Richard Davis
said: “The banking industry as a whole is operating under a
challenging economic environment. We have not been immune to those
challenges.”
In contrast, Wells Fargo, the fifth-largest US player, reported its
second-quarter income rose 9 percent to a record $2.28 billion.
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By GlobalDataSecond-quarter net credit losses were
$720 million (0.87 percent of average loans, annualised), flat
compared with $715 million (0.90 percent) in first quarter 2007 and
up from $432 million (0.58 percent) in second quarter 2006, when
consumer losses were historically low, said the bank, following the
fourth-quarter 2005 spike in bankruptcy-related losses.
