The march of losses and significantly lower earnings commenced last week, with Citigroup reporting a $2.8-billion net loss, and Merrill Lynch—soon to join Bank of America—lugging a loss on continuing operations of $5.1 billion. Citi’s credit costs soared; the bank endured $4.9 billion in net credit losses and registered a $3.9 billion in increased loan reserves. And Citi took $4.4 billion in pretax net writedowns in securities and banking.
JPMorgan Chase saw its earnings dwindle to $527 million from $3.37 billion in third quarter 2007, while income from continuing operations at Bank of New York Mellon shrank to $305 million from $642 million on a year-over-year basis. Wells Fargo reported a more benign decline, with net income slipping to $1.64 billion from $2.17 billion. PNC Financial Services, BB&T Corp., and Zion’s Bancorporation all reported severe erosion in net income during the third quarter.
“Fourth-quarter earnings will be even bleaker than what we are now seeing,” according to Nancy Atkinson, senior analyst at Aite Group. “The third quarter includes July and August activities, before we were really aware of the extent of the problems. Not until the second or even third quarter of 2009 should we expect to see a turn around.” She expects community and regional banks to “do relatively well if they can keep their customers happy and control their foreclosures.”