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Citigroup Inc (C) And JPMorgan Chase & Co. (JPM) Boosts Banking Confidence

Two of the U.S. Banking giants, Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) have painted a rosy picture in their second quarter, which has led William Smith, Founder, CEO and Senior Portfolio Manager of Sam Advisors go bullish on the Banking Sector. During an interview on CNBC, Smith said that the recent quarterly results disclosed by the two banks have revived the confidence in the banks. However, he feels that the stiff regulations are still a roadblock, curbing growth of the sector.

Citigroup Inc (C) Has a Lot of Issues to Handle: Jim Sinegal

The day before yesterday, Citigroup Inc (NYSE:C) reported its earnings to the tune of $1.24 per share before the legal charges, beating the estimates of $1.05 per share. Smith appeared impressed with the way Citigroup has pulled itself this quarter.

“The management has done a terrific job there, getting its operation turnaround, cost cutting has been going a little bit above the plan. And more importantly, Citi Holdings, which is pretty much their discontinued operations, actually showed a profit,” Smith said.

Despite a better performance Citigroup Inc (NYSE:C)’s profit dropped by more than 96%, as a result, of $7 billion legal charge it had to pay out to the Department of Justice (DoJ), which is a problem area, according to Smith. He added that the stringent regulations imposed by the government are taking its toll on the banks.

Smith added: “Government is basically using all of these banks as a piggybank right now. They know the banks have to settle, and they are just keep going after them. And sooner or later this will stop.”

At the same time,  JPMorgan Chase & Co. (NYSE:JPM) too has reported its second quarter earnings per share at $1.46, above the market estimates of $1.29, where it reported an exceptional performance in the consumers division. Smith said that the results posted by Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) highlights individual strength points of these banks. In the meanwhile, Smith sees every single bank in the U.S. to benefit from the expected hike in the interest rates and improving economic situation. But, Smith underlined that the employment scenario plays a vital factor in economic recovery, which is still not up to the mark, and it might take a while for interest rates to climb.

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