US banks' earnings up despite trading hit

NEW YORK • Large banks in the United States reported mostly higher second-quarter earnings last week, even as a pullback in trading revenues due to crises in Greece and China dented results.

The biggest hit came at Goldman Sachs, where revenues in bonds, foreign exchange and commodities trading fell 28 per cent.

JPMorgan Chase, the biggest US bank by assets, cited Greece as a key factor in a 10 per cent decline in bond, foreign exchange and currency trading. Bank of America saw a 9 per cent drop in this category, while Citigroup's fell 1 per cent.

Bank executives said fewer bank clients are willing to step in and provide key liquidity to facilitate trading. Banks have also cut back on activities following US regulations imposed since the 2008 financial crisis, such as the "Volcker Rule", which takes effect on Tuesday and prohibits banks from using their own funds to make some speculative trades. Analysts say bond trading could be especially vulnerable to further pullback in the months ahead due to a plan by the US Federal Reserve to raise zero-level interest rates later this year.

Despite the hit from trading, four of five large US banks either met analyst expectations on earnings, or exceeded forecasts. The biggest jump came at Citigroup, which reported US$4.8 billion (S$6.6 billion) in profits, up from just US$181 million in the year-ago period.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Sunday Times on July 19, 2015, with the headline 'US banks' earnings up despite trading hit'. Print Edition | Subscribe