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DatabankMarch 29 2011

US bank revenue sources diverge

It was a year of mixed fortunes on Wall Street in 2010, as Citigroup returned to profit, but Bank of America Merrill Lynch (BAML) slipped back into making a loss. Perhaps even more striking than the headline results are the wide differences between revenue sources.
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Percentage breakdown of US operating income

When looking at the distribution of revenues, unsurprisingly, Goldman Sachs and Morgan Stanley have the highest proportion of trading income as a percentage of total operating income. But the benefits of Morgan Stanley’s purchase of a majority stake (soon to be a full buyout) of Citi’s retail brokerage Smith Barney are immediately clear. Fee and commission income for the bank topped 55%, whereas trading retains its lead in the Goldman revenue breakdown. While Goldman’s net profit was down 35%, Morgan Stanley’s rose fivefold, although one-off items such as the sale of its stake in China International Capital Corporation also played a part.

Citigroup is the only bank with more than 50% of its revenue deriving from interest income, and had to allocate close to 30% of its operating income as impairment and provisions, most probably deriving from growing non-performing loans on its $680bn loan book. BAML also suffered high impairment costs and their ‘on-balance-sheet’ loan book now amounts to close to $1,000bn.

2010 vs 2009 US bank profits

JP Morgan increased its profits 53% and made the largest pre-tax profit in its history according to theBankerDatabase.com, at $24.8bn. It remains a balance sheet machine, with 50% of its revenues generated by interest income – exceeded only by Citigroup.

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Read more about:  Databank , Rankings & data , Americas , US