BofA, Citi post disappointing results

NEW YORK: The final months of 2014 were more difficult for big banks than investors suspected.

Bank of America Corp and Citigroup Inc reported disappointing results on Thursday, hit by lower trading revenues and more legal expenses. That followed JPMorgan Chase & Co’s weaker earnings announced the day before.

Like JPMorgan Chase, Citigroup and Bank of America saw drops in their fixedincome trading revenue as client trading activity slowed. Citigroup said revenue in that part of its business fell to $2 billion in the period, a drop of 16% from a year earlier. BofA’s fixed-income trading revenue fell to $1.5 billion from $1.9 billion a year earlier.

The drops have perplexed investors and analysts alike. For the last few years, the bond and stock markets remained quiet and kept investors from having to trade heavily. It was thought the volatility in the last three months of the year, with big swings in stocks in October and December, would give banks an opportunity to boost their trading businesses. Typically, high volatility means people trade more, but that’s not how it played out.

“The results definitely left investors with frustration and disappointment,’’ said Shannon Stemm, senior financial services analyst at Edward Jones.

Legal costs have also weighed on the banks.

Citigroup warned investors that it would incur charges of $3.5 billion for the fourth quarter to cover the costs of investigations into currency trading, the manipulation of a key interest rate, and anti-money laundering probes.

JPMorgan disclosed $990 million in after-tax legal expenses related to its own foreign currency probes. BofA did not have big legal expenses this quarter, but it did in 2013, leaving expenses difficult for investors to predict.

For the fourth quarter, BofA announced profit of $3.05 billion, or 25 cents a share, down from $3.44 billion, or 29 cents a share, a year earlier. Total revenue fell 12.6% to $18.96 billion.

The Charlotte, North Carolina-based bank reported one-time items that lowered its earnings by seven cents a share. Those items were tied to the valuation of the bank’s debt and other underlying securities.

The results fell short of estimates, with analysts surveyed by FactSet Research Systems Inc expecting earnings of 31 cents a share on revenue of $21.08 billion.

Meanwhile, Citigroup had a quarterly profit of $350 million, or six cents a share, compared with $2.5 billion, or 77 cents a share, a year earlier. Revenue was flat at $17.78 billion.

Citigroup’s earnings fell short of analysts’ estimates of 10 cents a share, according to FactSet.