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Big bank earnings signal fourth quarter troubles

A pedestrian walks by a CitiBank branch office on April 18, 2011 in San Francisco, Calif. Citi reported earnings today.

Jeremy Hobson: We got earnings this morning from two banks. Citigroup said it made $1.2 billion dollars last quarter, down 11 percent from a year earlier. Wells Fargo said it made $4.1 billion; that is up 20 percent from a year earlier.

For more, let's bring in our New York bureau chief Heidi Moore, who joins us live. Good morning, Heidi.

Heidi Moore: Good morning, Jeremy.

Hobson: So make sense of these earnings for us.

Moore: Sure, absolutely. Well what we saw was the banks still profitable, which is great. But we have to take a close look at the fourth quarter, which is the last three months of the year. The banks who have reported so far -- J.P. Morgan, Citigroup, Wells Fargo -- all did really well until October.

And then, that's when the European debt crisis hit, and we saw the evidence of a credit crunch. And we're still seeing that evidence of a credit crunch, so that's what we have to keep an eye on going forward. That's where the banks got hit.

Hobson: Why the difference between these two banks this morning -- with Wells Fargo doing better than it did a year earlier, and Citi doing worse?

Moore: This is where you see the banks start to distinguish themselves in how they've chosen to run their businesses, right? So, Citigroup still has significant investment banking -- it serves companies and does a lot of trading. Wells Fargo focuses on businesses, and consumers, and lending, and right now, that's doing quite a bit better. Wall Street is suffering -- you're seeing that where Citi and J.P. Morgan are concerned. And Wells Fargo's doing very well because the consumer is doing better.

Hobson: Heidi, what do these earnings tell us -- if anything -- about the health of the overall economy?

Moore: It tell us quite a bit. It does tell us that there's probably some strength left there. Lending still can go up -- and is going up -- at Wells Fargo and at J.P. Morgan. And it's also telling us that we have to be careful at the higher reaches of finance -- where Europe is concerned, where debt is concerned, where investment banking is concerned -- because once that hits the banks, it can crawl throughout the economy. So we have to keep an eye there.

Hobson: Marketplace New York bureau chief Heidi Moore. Heidi, thanks a lot.

Moore: Thank you, Jeremy.

About the author

Heidi N. Moore is The Guardian's U.S. finance and economics editor. She was formerly the New York bureau chief and Wall Street correspondent for Marketplace.

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