While total third-quarter net earnings at 20 selected banking groups rose by almost $2.5 billion to $30 billion year-on-year, there was a marked geographic bias – with the strongest performing banks based in the US, France and China.
Strip out JPMorgan Chase’s sixfold rise of more than $3 billion in net earnings for the quarter to $3.56 billion – driven by strong investment banking and asset management figures but hammered by underperforming retail and card units – and net earnings at 20 of the biggest banks to report third-quarter results actually fell (some banks, including HSBC, Lloyds and Standard Chartered, do not publish earnings for the Q3 period).
A rise in net profits of around 20 percent was seen at Bank of China, Industrial and Commercial Bank of China and China Construction Bank, boosted by a lending boom in the first half – although the rate of increase slowed slightly in the third quarter.
In a generally positive assessment, China’s banks said that net interest margins had stabilised and, looking ahead, forecast that lending would remain buoyant into 2010.
Among banks in Europe, Société Générale more than doubled its quarterly earnings, easily beating analyst forecasts, boosted by strong French retail banking revenue growth, declining provisions and a sharper than expected cut in expenses. Though analysts said there remained some pockets of concern, such as future loan losses in its consumer finance arm and further deterioration of credit risk in its operations in Russia and Romania, the cost of risk at group level has stabilised at 120 basis points.
Santander’s quarterly earnings of €2.2 billion ($3.3 billion) was down by only 3 percent year-on-year, and in an upbeat assessment, the bank reiterated its full year earnings target of €9 billion. At Barclays, although third-quarter net earnings fell by more than 50 percent, largely on losses on the value of its own debt and other one-off items, underlying earnings for the first nine months of the year more than doubled.
In common with HSBC, which said only that its underlying third-quarter profits were “significantly ahead” of a year ago, Barclays indicated that bad debts may have peaked.
Among the more positive developments of the reporting season was a sharper than forecast increase in underlying banking earnings at ING (net earnings of €499 million compared with a loss of €477 million in the year ago period), boosted by lower-than-feared loan-loss charges, strong fees and commission income, and lower costs, notably at ING Direct.
Credit losses peaked?
As for the fourth quarter, Bank of America, which reported a net loss of $1 billion, indicated that credit losses may have peaked, though its outgoing CEO, Kenneth Lewis, told analysts results going forward “are expected to continue to be challenging as we close the year”.
But the most marked uplift in sentiment for the remainder of the year was expressed by HSBC’s chief executive, Michael Geoghegan, who had expressed fears of a W-shaped double dip recession earlier in the year.
Boosted by an improvement at its troubled US consumer finance business, where bad debts fell for the first time since 2006, he said: “the biggest jolt has now passed through the global economy” and predicted a two-speed recovery, driven by emerging markets.
| RESULTS | ||
| Q3 group net earnings at 20 selected banks, ranked by year-on-year change | ||
| Q309 ($bn) | % change | |
| JPMorgan Chase | 3.56 | 571.6 |
| Société Générale | 0.64 | 137.0 |
| PNC | 0.56 | 115.3 |
| Wells Fargo | 3.23 | 96.9 |
| BNP Paribas | 1.95 | 44.4 |
| Bank of China | 3.21 | 22.5 |
| ICBC | 4.95 | 19.9 |
| China Construction Bank | 4.44 | 18.7 |
| US Bank | 0.61 | 3.4 |
| Intesa Sanpaolo | 1.01 | 0.0 |
| BBVA | 2.23 | 0.0 |
| Santander | 3.23 | -2.1 |
| Crédit Agricole | 0.58 | -7.9 |
| UniCredit | 0.84 | -19.2 |
| Barclays | 1.80 | -53.7 |
| Erste | 0.34 | -72.5 |
| ING | 0.75 | n/m |
| Citigroup | 0.10 | n/m |
| Bank of America | -1.00 | n/m |
| Royal Bank of Scotland | -3.01 | n/m |
| n/m = not meaningful Source: RBI | ||
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