Several Wall Street analysts on Monday gave a mixed 2009 outlook for Citigroup Inc (C.N) and Bank of America Corp (BAC.N), after the U.S. banks on Friday reported a surge in second-quarter loan losses despite posting profits for the period.
Analysts, including Rochdale Securities' Richard Bove, said both banks could be hurt by possible increases in loan losses, while Barclays' Jason Goldberg expects profitability to be elusive for Bank of America for the rest of this year.
Bank of America, the largest U.S. bank, on Friday said its quarterly net income fell 25 percent to $2.42 billion and warned results would continue to be hurt by troubled loans from credit card, mortgage and business customers due to the weak economy.
The one issue investors should be concerned about is that this could be the last quarter BAC makes money over the next year, FBR Capital Markets' Paul Miller said.
Separately, Keefe Bruyette and Woods' Jefferson Harralson and Brady Gailey widened their 2009 loss forecast for Bank of America to $1.05 a share from 25 cents.
However, analysts at FBR, Barclays, Rochdale and Wells Fargo Securities expect Bank of America to earn between 45 cents and 94 cents a share in 2009.
At least two analysts expect Citigroup, the No. 3 U.S. bank, to earn between 15 cents and 22 cents a share this year, while UBS analysts reversed their view to a loss of 10 cents from a prior profit view of 11 cents.
Deterioration in commercial credit is now accelerating and capital markets and mortgage revenues in the second half of 2009 are not likely to be as strong as that seen in the first half, Fox-Pitt Kelton's David Trone said.
Calling Citigroup a deeply troubled company, analyst Bove said he expects the bank to reach normalized earnings in five years -- two years more than the time that most companies under his coverage are estimated to take.
Citigroup, the banking giant scrambling to survive the financial crisis, last week reported a $4.28 billion quarterly profit, aided by a one-time gain related to the merger of its brokerage arm into a new venture.
Shares of Bank of America were down about 3 percent at $12.55, while those of Citigroup were down about 5 percent at $2.87 in morning trade on the New York Stock Exchange.