Rude health

14 July 2003

Citigroup grew second quarter earnings by 12%. Bank of America s profits meanwhile hit a record high. Both are enjoying a sweet spot that investors should savour while it lasts. The picture in other sectors is more worrying.

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Citigroup and Bank of America, the two biggest US banks by market value, reported higher secondquarter earnings thanks to surging consumer demand for mortgages and credit cards.

Both banks exceeded profit forecasts and reported record revenue as borrowers took advantage of interest rates at a 45year low. While lending to individuals accounted for more than half of the banks' earnings, both got a boost from a rise in securities underwriting as stocks rallied.

Citigroup, the world's biggest financial company, said net income from continuing operations rose by 12% to $4.3bn. Profits from consumer lending grew 18%, while earnings at its global corporate and investment bank rose 2%.

At Bank of America, revenue grew 12% to $9.8bn. Noninterest income, or profit from fees, rose 22% to $4.3bn as home refinancing tripled to $559m. Credit card income increased 23% to $762m.

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