For Citigroup it was a particularly bad year with further loan loss provisioning of $7.4bn in Q4 taking the year’s total to $17.4bn, a rise of 158.9% over the previous year. A pre-tax loss of $17bn in Q4 contributed to a year-on-year drop in pre-tax profit of 94.3% to $1.7bn. The Q4 result prompted Citigroup to take steps to increase its capital base by the sale of equity units convertible to common shares in a $7.5bn private placement to the Abu Dhabi Investment Authority. In January it raised a further $12.5bn.
Somewhat surprisingly, JP Morgan Chase & Co seem least affected by the subprime problem with Q4 pre-tax profit down only 20.3% over Q4/06 in spite of writing off $1.3bn of credit losses in the investment bank. The bank posted a year-on-year pre-tax profit increase of 14.7% to $15.4bn, the only one of the top five to record an increase. Its exposure to collateralised debt obligations (CDOs) was lower than many others, at $4bn, and this has been written off or hedged.
Bank of America recorded a pre-tax loss of $915m in Q4 driven by a $5.3bn CDO valuation charge in the Global Corporate and Investment Bank and a loan loss provision of $3.3bn for the quarter. Overall for fiscal 2007, pre-tax profit was down 34.7% to $20.9bn, despite the La Salle acquisition contributing from the end of October. Wachovia saw a Q4 pre-tax loss of $190m largely due to net market valuation losses of $1.7bn and a $1.5bn credit loss provision. The deteriorating housing markets and Wachovia’s limited exposure to subprime CDOs were behind the large charges taken in Q4. Pre-tax profit for 2007 was $8.8bn, 23.5% down on the previous year.
Wells Fargo bucked the trend by producing record revenues for both Q4 ($10.2bn) and the full year ($39.4bn), however a $2.6bn provision for credit losses in Q4 and a full-year $4.9bn provision helped drive pre-tax profit down 48.3% for Q4 year on year and by 8.8% to $11.6bn for the full year.
