Total profits dropped at the six largest U.S. bank holding companies in 2014 for the first time since 2008, despite the fact that four of them posted higher profits in 2014 year over year, SNL Financial reported.
Reported net income at JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley totaled $72.52 billion in 2014, compared with $77.13 billion in 2013, according to SNL. Aggregate return on average assets also fell for the group, coming in at 0.74 percent for 2014, compared with 0.80 percent in 2013.
BofA and Citigroup saw their net income drop by 57.72 percent and 46.06 percent, respectively, as legal expenses hit both institutions. ROAA at BofA dropped by 30 basis points year over year, and Citi’s ROAA dropped by 34 basis points.
"We believe we have put a significant portion of our outstanding legal matters behind us," Citigroup’s Chief Financial Officer John Gerspach fourth-quarter 2014 earnings call. The bank had $3.5 billion worth of legal reserves and repositioning costs in the last quarter of 2014.
Meanwhile, Goldman Sachs and Wells Fargo saw profits increase slightly in 2014, and JPMorgan and Morgan Stanley reported year-over-year net income increases of 21.42 percent and 75.39 percent, respectively.
JPMorgan ended 2014 with $21.76 billion in net profits, the second-highest in the group, shadowed by legal expenses. The company’s noninterest expense included $1.8 billion in legal costs for the nine months ending Sept. 30, 2014, according to its Form 10-Q filing for the third quarter of 2014, while the fourth-quarter earnings reported a legal expense of $1.1 billion.
Morgan Stanley’s ROAA increased by 33 basis points in 2014 to 0.77 percent, compared with a figure of 0.44 percent for 2013, representing the highest increase across the pack of six. "We will have an additional $25 billion of dead-weight risk-weighted assets that will roll down by the end of 2018, providing incremental ROE upside,” Morgan Stanley’s Chairman, President and CEO James Gorman said during the company’s Jan. 20 earnings call.
Although profits have grown for these six companies over the past couple of years, ROAA has largely stagnated thanks to the banks’ growing asset base. Five of these companies posted annual ROAA of above 1 percent in 2006, compared with just one, Wells Fargo, in the past five years.