FRIDAY JULY 17, 2009

Good Earnings for Banks?

Citibank and Bank of America announced this morning that they made a profit for the 2nd quarter. I guess we should all breath a sigh of relief that these two troubled financial companies can make a profit. Yet, I am not sure exactly sure if the earnings were good or not.

 

In Citibank’s case, much of the good earnings were driven by asset sales. In fact, it appears that Citi lost money on its trading desks. This compares very poorly with the trading results at JP Morgan and Goldman Sachs. Both of JPM and GS had record earnings in their trading operations. With the cost of funding at near zero, large proprietary trading desks should be coining money. Citi’s inability to make money in this environment is bothersome.

 

These earnings report are further evidence that while the headline earnings numbers look good, investors need to look deeper to determine whether the company’s performance is strong or not.

POSTED AT 1899-12-30 14:10:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.