Citibank just agreed to a seven billion dollar settlement with the Justice Department.
Paul Miller, Managing Director of FBR Capital Markets, says in spite of settlements, so far, the big banks are showing decent results.
“I mean, you saw JP Morgan blow numbers away,” he says. “Citi beat numbers,” and while Wells Fargo didn’t beat expectations, Miller calls the bank’s earnings acceptable.
Then there’s Bank of America, which Miller estimates could end up shelling out well over ten billion dollars for its role in the financial crisis.
Jim Sinegal, an equity analyst with Morningstar, agrees that the bank, which he calls “the most troubled,” will have to pay an enormous amount to the Department of Justice.
Legal expenses, he notes, have been going up at all the banks, like JP Morgan, which he says just paid half a billion in legal fees.
“That really eats into your earnings power and I don’t think that’s anything that’s going to go away anytime soon,” he says.
Sinegal says banks have been trying to cut costs with strategies like layoffs, but he says as long as the stock market keeps doing well, banks can manage more money and charge more fees.