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Bank earnings are up, but little confidence can be gained from the results. Citigroup (NYSE:C) reported profits of $3.8 billion; Goldman (NYSE:GS) had profits of $2.3 billion; and BofA (NYSE:BAC) had profits of $2.6 billion.

In terms of return on equity: Goldman was the leader with a ROE of 12.4 percent; Citigroup was second with something under 5.0 percent; and BofA continues to have an ROE of substantially less than 2.0 percent. Everyone has a long way to go to cover their cost of capital and everyone seems to be searching for something solid in terms of banking performance. However, this seems to be evasive to all concerned.

Brian Moynihan, the Chief Executive Officer of Bank of America, gets the prize for the most blind optimism: "Solid increases in loan growth to small businesses and middle-market companies, four straight quarters of steady growth in mortgage originations, record earnings in wealth management, and another quarter near the top in investment banking fees show we are balanced, focused and moving forward."

Good for them!

This report comes from the bank that had lower mortgage banking income, sluggish loan growth with profits from consumer loan growth down 4.4 percent from a year earlier, a decline in net interest margin from 2.51 percent to 2.43 percent, year-over-year, and a continued drag from earlier mortgage acquisitions. Furthermore, litigation expense was up to $881 million from $793 million last year.

The one really bright spot seems to be the BofA cut 16,000 jobs last year which saved the bank about $1 billion. There is nothing in the report that gives one any confidence that the economy is really growing and that Bank of America is participating in the recovery.

But, this is true of the other reports as well. Citigroup presented its good news and the good news came from increased revenues from debt and equity underwriting, the cutting of costs, and the release of loan loss reserves from an improving loan portfolio.

In terms of cutting costs this is a big item for new Chief Executive Officer Mike Corbat. In December Mr. Corbat announced a cut of 11,000 jobs this year, something that would save the bank around $1 billion. Right in the ballpark with the BofA figures above.

The release of loan loss reserves is consistent with what competitors JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) reported last week. It is good news that the quality of the loan portfolio is improving. However, these earnings are not sustainable.

In addition, Citigroup reported that its capital ratios have improved substantially. This will probably allow Citi to buy back some of its stock next year, something it has not been able to do.

In terms of lending … well, nothing here … just like JPMorgan and Wells Fargo. Consumer loan is down and mortgage lending is not strong, but Citi has stated that it is moving away from being so aggressive in the mortgage lending area. Perhaps the most dramatic piece of information coming out of the report, something that shows what Citigroup has become, was that over 50 percent of the revenue of the bank comes from outside the United States.

Goldman Sachs Group, Inc. is the financial institution that is closest to regaining its footing in the post-recession period. Although its return on equity remains below the 20 percent range that it formerly ran in, at least it is somewhere around the level of its cost of capital. Not to shabby relative to most of its competitors.

It is shifting its earnings source given the economic conditions and the regulatory environment -- and this shows in the results. The New York Times emphasizes that Goldman reported a record amount of debt underwriting in the first quarter and a significantly higher amount of equity underwriting. However, in terms of trading revenues, trading in fixed income securities, currencies and commodities, the numbers are not so good. Trading was down 7 percent from the year earlier quarter, and 25 percent below that achieved in the first quarter of 2011. This, apparently, is the "new" Goldman.

In addition, the investment banking revenue increased, year-over-year, by 36 percent. As with other, large, financial institutions, Goldman is cutting back on staff. Employment is down 10 percent from a year ago.

We only have five of the biggest banks reporting so far for the first quarter of this year, but the basic conclusion that one can draw from their statements is that banking has not yet returned to anything like normal. Thus, almost four years into the economic recovery and the banks are scrambling for results. One cannot really discern a "business model" in the reports anyone is providing.

The closest to having a coherent pattern seems to be Goldman Sachs. The other large institutions seem to be gathering a little revenue here this quarter and a little revenue there in another quarter. There is no consistent economic performance from anyone. Cutting costs and reversing out loan loss reserves is not a sustainable business strategy.

Furthermore, there seems to be no evidence that the efforts of the Federal Reserve System is really helping these large banks get their acts together. There may be plenty of liquidity in the financial system but it does not seem to be creating the type of loan growth that one would expect at this particular stage of the business recovery. If anything, the stimulus seems to be helping out the banks in non-traditional areas that are not consistent with good, steady banking business.

We will just have to keep listening to the financial reports coming out and see others in the banking sector are experiencing the same things. And, with the ROEs these banks are earning, it is hard to economically justify any major investment in them. Their performance has gone from bad to not-so-bad. You could say that their stocks have been oversold. If so, then maybe there will be a bounce from oversold to not being oversold.

Is this a good investment strategy? It's your money!

Source: More Big Banks Report: Citigroup, Goldman And BofA