With the US reporting season for fiscal 2010 now concluded and results posted from around one-half of the major European lenders – HSBC, Lloyds, UniCredit, Intesa Sanpaolo and Royal Bank of Scotland are yet to report – results are starting to return to normal.
Having hailed 2010 as a “turnaround” year, Citigroup has returned to profit after two successive years of losses; in Europe, it was a similar position at ING.
Elsewhere, Société Générale posted a strong set of results for the 12 months to 31 December.
Net profit at SocGen rose by over 500%, boosted by a near 30% fall in bad loan charges, its first full year earnings since it kicked off its own five-year turnaround plan, dubbed Ambition 2015.
BNP Paribas also posted solid earnings (loan charges fell by over 40%) with a strong operational performance boosted by a resilient performance from its retail unit.
In the UK, the first of the major banks to report, Barclays, beat analyst forecasts with a 30% rise in net income for the year.
BBVA also caught the headlines, increasing its net profit for fiscal 2010 by almost 10%, despite increasingly challenging market conditions in its domestic Spanish market, where it earns around one-third of group revenue.
By contrast, a sharp rise in loan provisions resulted in net profit falling by almost 10% at rival Santander.
Although earnings rose at 9 of the largest 12 banks in the US and Europe in fiscal 2010, JPMorgan Chase was the only lender to post a profit in excess of the post-crisis record year of 2006.
Looking ahead, Chase CEO Jamie Dimon said that profit would rise again in 2011.
“We are starting to see the foundation of a broad-based economic recovery,” said Dimon.
JPMorgan Chase-excepted, major challenges remain for major lenders to get back to results on a par with fiscal 2006.
Barclays in particular, faces a challenge to keep the lid on operating expenses (up by almost 20% in 2010). Although loan impairment charges fell by almost one-third, Barclays’ retail profits before tax remained flat in 2010 and looking ahead, it has recognised the need to raise its game in the light of a tightening regulatory environment.