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It was a tale of two earnings reports for two of the biggest banks in the U.S. today. Wells Fargo (NYSE: WFC) reported a 20% year-over-year jump in its fourth-quarter profit, while Citigroup (NYSE: C) earnings dropped 11% from last year’s fourth quarter.
The difference between the two came down to one area: investment banking. Wells Fargo isn’t dependent on it, instead focusing on the consumer aspects of its business, such as mortgage lending. Strong deposit and loan growth led to the bank’s record quarterly profits of $4.1 billion, or 73 cents a share.
On the other hand, investment banking is a big part of Citigroup’s business. The bank struggled in that area last quarter, with revenues falling 10%.
That’s not much of a surprise, as investment banking was subject to the same market volatility that individual investors suffered through last quarter. Citigroup’s weak investment banking performance is in line with that of JP Morgan Chase (NYSE: JPM). The nation’s largest bank reported last week that a 30% decline in their investment banking revenue was the major factor behind a 23% decrease in profits.
JP Morgan and Citigroup’s investment banking slump doesn’t bode well for Goldman Sachs (NYSE: GS) or Morgan Stanley (NYSE: MS) – the two biggest investment banks in the U.S. Goldman Sachs reports its earnings tomorrow morning; Morgan Stanley’s earnings announcement comes on Thursday.
Wells Fargo’s stock made modest gains after today’s good news, climbing 0.73%. Citigroup’s stock plummeted, falling 8.21% to $28.22 a share.