Research on JP Morgan and Citigroup: Banking Industry Adapts to Changing Regulatory Environment

Mon Feb 11, 2013 8:01am EST

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LONDON,  February 11, 2013  /PRNewswire/ --

The financial crisis of 2009 led regulators to create a set of new regulations
for the banking industry. It will be interesting to see how major U.S. banks
such as JP Morgan Chase & Co. (NYSE: JPM) and Citigroup Inc. (NYSE: C) adapt to
the changing regulatory environment. StockCall has posted free technical
research reports on JP Morgan and Citigroup, and these can be accessed by
signing up at

http://www.stockcall.com/analysis

Regulatory Environment

Banks' role in the housing market bubble that led to the financial crisis had
been criticized by regulators. Post-financial crisis, the biggest question for
regulators across the world was how to prevent a similar crisis from happening
in the future?

In the U.S., President Obama signed the Dodd-Frank Wall Street Reform and
Consumer Protection Act into a federal law in 2010. The Dodd-Frank act is the
biggest regulatory overhaul of the U.S. financial system since the Great
Depression.

The legislation increases government oversight of trading in complex instruments
such as derivatives. It may be recalled that use of complex derivative
instruments had fueled the housing market bubble. The legislation also restricts
banks' proprietary trading activities.

Low Interest Rate Environment

Apart from regulatory reform, another challenge for major U.S. banks is the low
interest rate environment. With the Federal Reserve committed to keep interest
rates at record low level for a considerable period, banks are expected to
continue to face margin pressure. Net interest margin, an important measure of
lending profitability at banks, has fallen sharply, hurting banks' bottom-line.

However, the low interest rate environment has also boosted lending activities.
This is benefiting banks and the trend is expected to continue.

Stabilizing Financial Markets

Financial markets have stabilized as concerns over the Eurozone debt crisis have
eased. This should boost banks' trading activities.

Trading activity at big banks had remain muted in recent years as market
participants remained cautious in the wake of debt crisis in the Eurozone and
global economic uncertainty. However, measures taken by the European Central
Bank (ECB) last year have helped in stabilizing the region and boosted market
sentiment.

Q4 Results at JP Morgan and Citigroup

Last month, JP Morgan Chase and Citigroup reported their financial results for
the fourth quarter ended  December 31, 2012. Download the free report on JP
Morgan upon registration at

http://www.StockCall.com/JPM021113.pdf

Despite the challenging environment, JP Morgan reported record net income of 
$21.3 billion  for the full-year 2012. For the fourth quarter, the bank's net
income was  $5.7 billion, up from  $3.7 billion  reported for the same period in
the previous year.

JP Morgan CEO  Jamie Dimon  noted that the company's results reflected strong
underlying performance across virtually all its businesses for the fourth
quarter and the full year, with strong lending and deposit growth. Dimon noted
that the company continues to see favorable credit conditions across its
wholesale loan portfolios and strong credit performance in its credit card
portfolio.

Meanwhile, Citigroup reported fourth quarter net income of  $1.2 billion, or 
$0.38  per share, and revenue of  $18.2 billion.  Michael Corbat, who took over
the role of CEO from  Vikram Pandit  last year, said that the company's
bottom-line earnings reflect an environment that remains challenging, with
businesses working through issues like spread compression and regulatory
changes. Citigroup technical report can be accessed for free by signing up at

http://www.StockCall.com/C021113.pdf

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