Bottom of the class

16 July 2010 By Antony Currie Follow @AntonyMCurrie

Citigroup’s 7 pct ROE in the second quarter was hardly stellar. But it beat BofA’s, which needed oneoffs to hit 5.7 pct. And unlike rivals, the Charlotte bank didn’t crow about releasing reserves. Some mortgage costs even increased. BofA is looking like the U.S. banking laggard.

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Citigroup reported secondquarter net income of $2.7 billion, or 9 cents a share. The results included a pretax gain of $1.5 billion from releasing loan loss reserves.

Bank of America reported secondquarter net income of $3.1 billion, or 27 cents a share after preferred dividends. BofA had several oneoff pretax gains: $1.2 billion from selling its preferred and common shares in Itau Unibanco, $440 million from selling its equity position in MasterCard, $60 million from selling the longterm asset management business of Columbia Management and $1.2 billion from a change in the valuation of Merrill Lynch structured debt.

BofA took a $428 million pretax hit from selling its 24.9 percent stake in Mexico's Grupo Financiero Santander. Its costs for buying back mortgages under representations and warranties claims rose to $1.2 billion.

At midday on July 16, Bank of America's share price was down almost 8 percent at $14.18.

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