U.S. banks show vague signs of life

by Xinhua writer Yang Lei

NEW YORK, Jan. 20 (Xinhua) -- Financial firms had the whole market's attention on them on Wednesday as a bunch of most heavy-weight banks presented their results for the last three months in 2009.

While most investors would agree that overall condition of the financial industry did improve year-on-year, banks continue to be troubled by loan losses as unemployment rate remains at historical high and consumers hold tight to their wallets.

Bank of America, the largest U.S. lender, said on Wednesday that its net loss in the fourth quarter jumped to 5.2 billion U.S. dollars, or 60 cents a share, from a net loss of 2.4 billion dollars a year earlier. Analysts surveyed by Bloomberg had expected a loss of 52 cents a share.

For the year 2009, the bank posted a loss of 2.2 billion dollars, or 29 cents a share, compared with a profit of 2.6 billion dollars, or 54 cents per share, in 2008.

It is the first annual loss the bank, which acquired investment bank Merrill Lynch in 2008, has reported in more than two decades.

Wells Fargo, which also bought out Wachovia during the financial crisis, in contrast reported a record annual net income of 12.3 billion dollars, up from 2.6 billion dollars one year earlier.

It swung to profit in the fourth quarter with a net income of 2.8 billion dollars, or 8 cents per share. The bank reported a loss of 2.7 billion dollars one year earlier.

Meanwhile, Morgan Stanley posted its second consecutive quarter of profits but the result fell short of analysts' expectations. The New York City-based bank reported a profit of 29 cents per share, compared with a loss of 11.35 dollars per share in the fourth quarter 2008. But the market was expecting an average profit of 36 cents per share.

Credit losses continue to weigh on big banks. Bank of America raised its provision for credit losses to 10.1 billion dollars in the fourth quarter, up from 8.5 billion dollars one year earlier.

In the mean time, losses from consumer credit card business rose to 4.9 billion dollars from 3.3 billion dollars. For the period of 2009, total write-downs jumped to 33.7 billion dollars, which is more than double the 16.2 billion dollars in 2008.

Wells Fargo also saw its net charge-offs soaring to 5.4 billion dollars in the fourth quarter from 300 million dollars in the third quarter.

Despite that the economy has been on the track of recovery, the labor market remains weak. Brian T. Moynihan, chief executive of Bank of America, said in a statement that economic conditions remain fragile and they expect "high unemployment levels to continue, creating an ongoing drag on consumer spending and growth."

"Almost all of the increase in charge-offs was in commercial and consumer real estate, with the other portfolios showing flat to declining losses," Wells Fargo echoed in a statement.

Investment banking business has been the bright spot on banks' balance sheets. JPMorgan Chase & Co., the first major financial firm to deliver quarterly statement, reported on Friday a profit of 3.28 billion dollars in the fourth quarter last year, or 74 cents on a per share basis, easily beating analysts' expectations.

The company's investment banking business contributed a profit of 1.9 billion dollars, largely helped by robust debt and stock underwriting fees. Debt underwriting fees jumped 58 percent to 732 million dollars from one year ago, while stock underwriting fees climbed 66 percent to 549 million dollars.

At another traditional giant investment bank, Morgan Stanley's profit was largely boosted by its joint venture with Citigroup's retail brokerage unit Smith Barney, which more than doubled revenues in its global wealth management operations to 3.1 billion dollars.

Until Wednesday investors have seen reports from most of the major banks. Goldman Sachs will deliver its quarter and full year result on Thursday.

Market sentiment slumped on Wednesday afer banks' results. All major indexes lost more than 1 percent and dropped to the lowest level since November. Morgan Stanley shares fell 53 cents, or 1.7 percent, to 30.63 dollars; Wells Fargo fell 46 cents, or 1.63 percent, to 27.82 dollars a share.