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.