Strong consumer spending and revenues from investment banking bolstered second-quarter earnings, some of the nation's largest banking companies reported Monday.

Citigroup Inc., the largest U.S. banking company by assets, said profits from its consumer operations jumped 40%, contributing to a 9% rise in net income, to $2.4 billion. Earnings per share at Citigroup reached 70 cents, beating Wall Street's expectations by 6 cents.

Merger charges damaged results at Bank of America Corp., the No. 2 U.S. banking company. It posted a 2% gain, to $2.06 billion on an operating basis, but net income fell 17%. Earnings per share were $1.18, a penny better than the consensus estimate.

Analysts were pleased that the $614 billion-asset company not only retained customers in California but also expanded its base there. The Charlotte, N.C., banking company's California deposits grew 7% from a year earlier and 9% from the first quarter.

At Wells Fargo & Co., the seventh-largest U.S. banking company, net income grew 29%, to $931 million, on the strength of consumer finance, brokerage, and deposit fees.

"Consumers spent a ton of dough and borrowed a lot to do that during the quarter," said James R. Bradshaw, an analyst at Pacific Crest Securities in Portland, Ore. "We're seeing the results of that."

Citigroup, with $690 billion of assets, said it is benefiting from the diverse business mix created by last year's merger of Travelers Group and Citicorp.

Sanford I. Weill and John S. Reed, the company's co-chief executive officers, said at a press conference Monday that performance is expected to improve as the integration continues into next year.

"We are very optimistic that the real promise of the merger is in front of us," Mr. Reed said.

Profits from corporate and investment banking-activities that have dragged down earnings in recent quarters-rose 26%, to $1.26 billion.

Citigroup raised its expectations for merger-related cost savings. Through the end of the second quarter, $1.7 billion of the $2 billion in annual cost savings originally projected have been made, the company said, adding it expects to exceed the $2 billion target by yearend.

Analysts said the company exhibited strong growth in revenues in several consumer and wholesale banking activities. Consumer banking was also helped by expense reductions as the company continued its consolidation of back- office support operations.

The performance was "phenomenal," said Lawrence Cohn, an analyst at Ryan, Beck & Co.

Analysts said the bank is awash in capital it can put to use to invest in its high-growth business. "You can expect them to step up the pace of purchase acquisitions and share repurchases," said David S. Berry, director of research at Keefe, Bruyette & Woods Inc.

Mr. Reed said during the press conference that Latin America, particularly Brazil, would be a focus. "We need to increase our footprint in Brazil," he said.

Profits from the company's branch banking activities in North America rose 186%, to $106 million, even though revenues were down 1% from the year-earlier figure. Analysts said the results reflect significant reductions in expenses in branch operations. The company said it cut expenses in the unit by 25%, to $329 million.

Profits from credit card operations rose 96%, to $267 million, and receivables rose 15%, to $70.3 billion. Net chargeoffs fell to 4.63% of receivables, down from 5.65% in the year-earlier period. The co-CEOs declared their intention to leverage the company's 20% share of the North American card market into a leading role in electronic commerce.

At Salomon Smith Barney, profits soared 75%, to $610 million, and revenues rose 30%, driven by hot demand for mergers and acquisitions advice and underwriting services. Investment banking revenues in the unit rose 20%, to $762 million.

Meanwhile, trading revenues fell 17%, to $600 million. Analysts said the drop reflects a return to more normal conditions compared with last year's record second quarter.

In asset management, profits jumped 22%, to $84 million. Assets under management at SSB Citi Asset Management rose 19%, to $347 billion.

Shares in Citigroup closed Monday at $49.1875, up 18.75 cents.

Bank of America Corp.

Accounting for a $145 million merger-related charge, net income at Bank of America fell 17% in the quarter, to $1.92 billion. But last year's second-quarter profit included a $277 million gain from the sale of branches in Florida.

Bank of America was formed Sept. 30 from the merger of the old BankAmerica Corp. and NationsBank Corp.

"We're pleased with how the merger is progressing," said Melba Bartels, a bank analyst at Ragen MacKenzie Group Inc. in Seattle. "It appears to be having a minimum impact on customer retention, and cost savings are coming through."

Noninterest expense dropped 7% in the second quarter, to $4.46 billion.

"We're on track if not a little ahead of our annual goal for expense savings-$1 billion," said James Hance, the company's chief financial officer.

Bank of America's employee numbers dropped 9.4%, to 161,919 in the second quarter, while its branches declined 7%, to 4,531.

The company's efficiency ratio improved to 54.4%, from 57.4%, and the company seeks a further decrease to 50% by the end of next year, Mr. Hance said.

While average managed loans rose 11%, net interest income was little changed, at $4.66 billion. Asset securitizations, divestitures, loan sales, and a higher amount of lower-yielding securities curbed net income. The company purposely switched to bonds of shorter duration as interest rates rose.

Given that rising rate environment, the strategy "should help going forward," because when the bonds mature, the bank can replace them with higher-yielding securities, Ms. Bartels said.

Investment banking income, at $555 million, was down 16%, but rose 43% from the first quarter. Last year's number was buttressed by income from Robertson Stephens, which Bank of America sold to BankBoston Corp. later in the year.

Investment banking was strong across the board, analysts said. "Underwriting, advisory services and syndications showed considerable improvement" from the first quarter, said Mr. West.

And the future may be bright. "Given the pipeline activity and deal flow, we expect the trends, especially syndication activities, to continue into the third quarter," said Mr. Hance.

Nonperforming assets rose to $3.07 billion, or 0.5% of total assets, from $2.53 billion, or 0.44% of assets a year earlier.

"Credit quality is still in a good range," said Michael Mayo, a bank analyst at Credit Suisse First Boston. Mr. Hance said the company's exposure to emerging markets has dropped by one-third since the end of 1997.

He and analysts said the bank is likely to maintain its earnings momentum. "We expect them to continue their strong performance for the rest of the year," said Ms. Bartels of Ragen MacKenzie.

Bank of America shares closed Monday at $74, down $1.50.

J.P. Morgan & Co.

The company said profits rose 4.7%, to $504 million or $2.52 cents per share, handily beating the consensus by 28 cents.

Last year's second quarter included a one-time gain of $70 million from the sale of the bank's global trust and servicing operations. Without the gain, 1999 second-quarter earnings would have risen 25% from the year earlier.

Morgan, like the more traditional Wall Street investment banks after which it is modeled, benefited from a surge in investment banking revenues.

"Growth and increased profitability in our client businesses, combined with more progress on productivity initiatives, produced a strong quarter," said chairman Douglas A. Warner 3d.

Still, Morgan's executives said much work remains to be done. "This is not intended to declare victory," said chief financial officer Peter Hancock. "We see our job as building a track record."

The $176 billion-asset banking company said it should be able to reduce expenses by $400 million this year as part of a previously announced restructuring program. For the first six months, Morgan said, its core operating expenses dropped $200 million. In the quarter, operating expenses were $1.4 billion, flat versus last year.

Morgan reported growth in its client-related businesses, though it reduced reliance on proprietary activities. Analysts said the company has succeeded in changing its business mix in favor of fee-generating activities and has recovered well from the severe market turbulence of last autumn.

"They have really achieved a breakthrough," said Carla D'Arista, an analyst at Friedman Billings Ramsey & Co. "Last year they arrived in the middle of a hurricane. Now the skies are clearing."

Global finance revenues rose 20% from last year's second quarter, to $1.8 billion, including a 30% rise in investment banking revenues, to $320 million, and a 75% jump in equities revenues, to $427 million.

Morgan attributed the strong showing in its client businesses to a red- hot market for mergers and acquisitions advice and high-yield debt origination and strong results in equity derivatives.

Asset management and private-client revenues rose 4%, to $410 million, on higher investment management fees, the bank said.

Revenues from proprietary investments dropped 72%, to $57 million.

Morgan, which has been substantially cutting back its loan portfolio and reducing its credit exposure, said it slashed its provision for credit losses by $70 million in the quarter.

Shares of J.P. Morgan rose 62.5 cents Monday, to $138.

Wells Fargo & Co.

The $205.4 billion-asset banking company, the product of last November's merger of Wells Fargo and Norwest Corp., said strengths from the combination continued to emerge in the second quarter.

Earnings per share of 55 cents topped the consensus by a penny.

Service charges on deposit accounts grew 11%, to $367 million. Trust and investment fees and commissions climbed 17%, to $315 million.

Wells posted strong growth in many of its business lines, including a 46% increase in retail and small-business net income, to $710 million.

Net income from the company's mortgage operations increased 30%, to $70 million. The growth came despite a 13% decline, to $23 million, in originations. The slippage in booked loans was overcome by a 21% gain in the servicing portfolio, to $266 billion.

There were also gains at Norwest Financial, the company's consumer and auto finance arm. Net income increased 22%, to $66 million, compared to the first quarter.

But Wells Fargo's wholesale banking unit is still lagging. The business line reported a 16% decline, to $186 million.

The company is generally unwilling to reduce underwriting standards to snag loans in a highly competitive lending environment, said Joseph K. Morford, an analyst at First Security Van Kasper in San Francisco.

"They are choosing to remain conservative," Mr. Morford said.

Separately on Monday, Wells Fargo announced the formation of an Internet services group to coordinate its on-line activity across all of its market areas and business segments. Executive vice president Clyde W. Ostler, formerly head of investments and on-line financial services, was tapped to lead the new group.

Shares of Wells Fargo closed Monday at $42.6875, down 43.75 cents.

Bank of New York Co.

The nation's 17th-largest banking company reported a 10% gain in profits, to $323 million, or 42 cents a share, in line with expectations. Profits were driven by double-digit gains in fee income businesses like securities processing.

The $67.8 billion-asset company has been steadily building up its fee- based businesses and reducing its reliance on income from traditional lending activities. Fees made up 61% of total revenues, up from 57% in the corresponding period last year.

Bank of New York, meanwhile, continued to improve its operating efficiency, reporting an efficiency ratio of 49.9% at the end of the second quarter, among the leanest in the industry.

"They continue to execute their strategy well and shift the mix toward fee income," said Lawrence Cohn, an analyst at Ryan, Beck & Co. in Livingston, N.J.

Fee revenues rose 16% in the second quarter, driven by a 22.7% rise in processing income, to $372 million. Trust and investment management fees rose 17.6%, to $60 million.

The company attributed the gains to new business and strong worldwide securities markets that helped generate demand for processing and custody services.

Assets under administration grew 20%, to $5.3 trillion.

Expenses rose 9%, to $472 million, reflecting acquisitions, the company said.

Analysts said the results should be even better in the third quarter, reflecting revenue gains from Bank of New York's $700 million acquisition of the global custody operations of Royal Bank of Scotland.

Shares of Bank of New York closed Monday at $38, up 43.75 cents. +++

Wells Fargo & Co.

San Francisco

Dollar amounts in millions (except per share) Second Quarter 2Q99 2Q98

Net income $931.0 $719.0

Per share 0.55 0.43

ROA 1.86% 1.55%

ROE 17.50% 14.72%

Net interest margin 5.68% 5.88%

Net interest income 2,328.0 2,247.0

Noninterest income 1,814.0 1,715.0

Noninterest expense 2,364.0 2,452.0

Loss provision 260.0 309.0

Net chargeoffs 261.0 303.0

Year to Date 1999 1998

Net income $1,815.0 $1,403.0

Per share 1.08 0.85

ROA 1.83% 1.53%

ROE 17.42% 14.46%

Net interest margin 5.64% 5.89%

Net interest income 4,608.0 4,456.0

Noninterest income 3,541.0 3,249.0

Noninterest expense 4,706.0 4,749.0

Loss provision 530.0 614.0

Net chargeoffs 534.0 613.0

Balance Sheet 6/30/99 6/30/98

Assets $205,421.0 $186,084.0

Deposits 132,542.0 127,245.0

Loans 108,481.0 103,203.0

Reserve/nonp. loans 460.03% 422.65%

Nonperf. loans/loans 0.60% 0.70%

Nonperf. assets/assets 0.43% 0.49%

Nonperf. assets/loans + OREO 0.80% 0.86%

Leverage cap. ratio 7.05% 6.89%

Tier 1 cap. ratio 8.40% 8.34%

Tier 1+2 cap. ratio 11.00% 11.26%

J.P. Morgan & Co.

New York

Dollar amounts in millions (except per share) Second Quarter 2Q99 2Q98

Net income $504.0 $481.0

Per share 2.52 2.36

ROA 0.76% 0.68%

ROE 18.00% 17.30%

Net interest margin 0.93% 0.59%

Net interest income 425.0 290.0

Noninterest income 1,661.0 1,863.0

Noninterest expense 1,417.0 1,416.0

Loss provision (105.0) -

Net chargeoffs (7.0) (60.0)

Year to Date 1999 1998

Net income $1,104.0 $718.0

Per share 5.53 3.51

ROA 0.83% 0.52%

ROE 20.10% 13.00%

Net interest margin 0.89% 0.63%

Net interest income 814.0 626.0

Noninterest income 3,763.0 3,524.0

Noninterest expense 2,984.0 3,048.0

Loss provision (105.0) -

Net chargeoffs (30.0) (104.0)

Balance Sheet 6/30/99 6/30/98

Assets $269,394.0 $280,777.0

Deposits 55,335.0 57,026.0

Loans 28,753.0 31,029.0

Reserve/nonp. loans 500.00% 712.70%

Nonperf. loans/loans 0.23% 0.18%

Nonperf. assets/assets 0.03% 0.02%

Nonperf. assets/loans + OREO NA NA

Leverage cap. ratio 4.50% 4.10%

Tier 1 cap. ratio 8.40% 7.70%

Tier 1+2 cap. ratio 12.50% 11.30%

Citigroup

New York

Dollar amounts in millions (except per share) Second Quarter 2Q99 2Q98

Net income $2,448.0 $2,240.0

Per share 0.70 0.63

ROA NA NA

ROCE 22.80% 21.80%

Net interest margin 4.54% 4.37%

Net interest income 5,007.0 4,639.0

Noninterest income 9,373.0 8,326.0

Noninterest expense 7,524.0 6,680.0

Loss provision 2,941.0 2,703.0

Net chargeoffs NA NA

Year to Date 1999 1998

Net income $4,810.0 $4,401.0

Per share 1.38 1.23

ROA NA NA

ROCE 22.90% 21.90%

Net interest margin 4.56% 4.37%

Net interest income 9,858.0 9,129.0

Noninterest income 18,592.0 16,632.0

Noninterest expense 14,845.0 13,419.0

Loss provision 5,718.0 5,292.0

Net chargeoffs NA NA

Balance Sheet 6/30/99 6/30/98

Assets $690,000.0 $750,800.0

Deposits NA NA

Loans NA NA

Reserve/nonp. loans 177% 196%

Nonperf. loans/loans NA NA

Nonperf. assets/assets 0.70% 0.60%

Nonperf. assets/loans + OREO NA NA

Leverage cap. ratio 6.40% 5.65%

Tier 1 cap. ratio 9.20% 8.46%

Tier 1+2 cap. ratio 12.00% 11.00%

Bank of New York Co.

New York

Dollar amounts in millions (except per share) Second Quarter 2Q99 2Q98

Net income $323.0 $295.0

Per share 0.42 0.38

ROA 1.95% 1.90%

ROE 24.82% 24.03%

Net interest margin 3.07% 3.28%

Net interest income 427.0 424.0

Noninterest income 651.0 561.0

Noninterest expense 513.0 472.0

Loss provision 15.0 5.0

Net chargeoffs 15.0 4.0

Year to Date 1999 1998

Net income $639.0 $578.0

Per share 0.82 0.74

ROA 1.94% 1.91%

ROE 24.65% 24.49%

Net interest margin 3.13% 3.30%

Net interest income 863.0 828.0

Noninterest income 1,276.0 1,113.0

Noninterest expense 1,022.0 939.0

Loss provision 30.0 10.0

Net chargeoffs 34.0 9.0

Balance Sheet 6/30/99 6/30/98

Assets $67,771.0 $63,003.0

Deposits 47,478.0 43,407.0

Loans 38,387.0 39,049.0

Reserve/nonp. loans 290.20% 356.10%

Nonperf. loans/loans 0.50% 0.50%

Nonperf. assets/assets 0.30% 0.30%

Nonperf. assets/loans + OREO 0.60% 0.50%

Leverage cap. ratio 7.65% 7.17%

Tier 1 cap. ratio 7.61% 7.25%

Tier 1+2 cap. ratio 11.49% 11.24%

Bank of America Corp.

Charlotte, N.C.

Dollar amounts in millions (except per share) Second Quarter 2Q99 2Q98

Net income $1,915.0 $2,298.0

Per share 1.07 1.28

ROA 1.25% 1.61%

ROE 16.40% 20.76%

Net interest margin 3.53% 3.80%

Net interest income 4,663.0 4,668.0

Noninterest income 3,522.0 3,636.0

Noninterest expense 4,457.0 4,767.0

Loss provision 510.0 495.0

Net chargeoffs 520.0 505.0

Year to Date 1999 1998

Net income $3,829.0 $3,629.0

Per share 2.15 2.03

ROA 1.26% 1.27%

ROE 16.59% 16.69%

Net interest margin 3.55% 3.81%

Net interest income 9,308.0 9,327.0

Noninterest income 6,745.0 7,129.0

Noninterest expense 8,910.0 9,471.0

Loss provision 1,020.0 1,005.0

Net chargeoffs 1,039.0 1,021.0

Balance Sheet 6/30/99 6/30/98

Assets $614,102.0 $571,890.0

Deposits 339,045.0 347,877.0

Loans 363,581.0 344,358.0

Reserve/nonp. loans 252.38% 299.98%

Nonperf. loans/loans 0.77% 0.65%

Nonperf. assets/assets 0.50% 0.44%

Nonperf. assets/loans + OREO 0.84% 0.73%

Leverage cap. ratio 6.34% 6.21%

Tier 1 cap. ratio 7.38% 7.32%

Tier 1+2 cap. ratio 11.09% 11.77% ===

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