Consumer credit casts cloud over JPMorgan and Citi

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Investment banking revenue was $4.6 billion in the quarter, up 16 percent from a year earlier.

Citigroup Inc. said Thursday that its third-quarter revenue rose 2%, boosted by another jump in investment banking and progress in its evolving consumer bank.

Wall Street has ramped up credit card lending amid a slump in bond trading, once a growth engine for many banks, but the higher provisions for bad debts fueled worries about the future profitability of an already costly business and sent shares in both banks lower. However, the bank's trading revenue was down just 11% from the same quarter a year ago, to $3.63 billion, compared with the bank's forecast of a roughly 15% drop.

Citigroup's investment bank was the driver of the bank's profit growth in the quarter, despite a notable drop in bond trading revenue. Earlier Thursday, JPMorgan reported third-quarter earnings that beat Wall Street estimates. Banks are looking to growth in loans to help offset the trading slump. He said, in the end, September was better than anticipated.

Citi's shares were down 2 percent in late morning trade, the worst performer among the major US banks.

Commenting on the lender's latest set of results, chief Michael Corbat said: "We had revenues in numerous products we have been investing in, tightly managed our expenses, and again saw loan growth in both our consumer and institutional businesses".

Corbat told analysts the uptick in provisions were a normal part of the credit cycle and did not point to evidence of consumers under stress. The bank had to set aside more money to cover bad loans like in the bank's credit card division.

From a bird's eye view, global consumer banking revenues were up 3% year-on-year to reach $8.43bn and by 9% at its institutional client group to $9.23bn, but corporate revenues cratered 55% to $509m reflecting the wind-down of legacy assets.

Citigroup this year has been ratcheting up its expectations for soured loans for its two North American credit card businesses, Citi-branded cards and cards issued for stores. The branded cards business has seen loss rates rise as some customers who the bank has added in recent years during a growth push have missed payments.

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