NEW YORK — With the banking industry under an intense spotlight because of the Occupy Wall Street demonstration, two of the biggest U.S. banks reported strong quarterly earnings Monday.
New York-based Citigroup's earnings rose 74 percent to $3.8 billion in the third quarter as more of its customers paid their bills on time, leading to lower losses from loans. An accounting gain also boosted income.
Meanwhile, San Francisco-based Wells Fargo's net income rose 21 percent to $4.06 billion, matching the forecasts of analysts surveyed by FactSet.
Wells Fargo CEO John Stumpf says he understands the "angst and anger" being expressed by the protesters at Occupy Wall Street and its spinoff sites around the country.
"This downturn has been too long. Unemployment is too high. And people are hurting. We get that," he said Monday in response to a question on the demonstrations.
For Citi, which was one of the biggest recipients of taxpayer support during the financial crisis, it was the seventh straight quarter of income growth. Citigroup received $45 billion in bailouts funds and was partly owned by the government until December 2010.
The banks' results came as the Occupy Wall Street movement entered its second month and spread across the country, targeting large financial institutions such as Citi. As of Monday, the bank said it had not yet been approached by organizers of the protest following an offer last week from Citigroup's CEO, Vikram Pandit, to meet with them. On Saturday, two dozen people were arrested after they entered a Citibank branch in New York and refused to leave.
Banks such as Citi have benefited as Americans have improved their financial health, saving more and paying off their credit card debt on time. Citi's losses from bad loans fell 41 percent during the quarter to $4.5 billion as defaults fell on Citi-branded cards. That allowed Citi to add $1.4 billion to its earnings from credit reserves it had set aside earlier in anticipation of deeper losses.
However, the bank's ability to collect fees from raising interest rates on loans or from fees for late payments has decreased because of new regulations. That led to a 9 percent drop in revenue at its North American consumer business. Wells Fargo took a similar hit to its credit card fee income due to new banking rules.
Citi said new regulation has also changed its plans for its private-label credit card unit, which issues cards in partnership with retail stores. Citi had said it was planning to either sell or reduce the size of the unit. The bank reversed course after noticing that customers are using retailer-issued cards more. Pandit said in an internal memo to employees the business earned $2.2 billion so far this year as delinquencies declined.
Wells Fargo also reported that borrowers weren't falling behind as much on paying their debts, which allowed the bank to reduce the amount it set aside to cover uncollected loans during the quarter and release $800 million from its reserves, which boosted income.
Net loan chargeoffs — the amount of loans written off as uncollectible — fell 8 percent to $2.61 billion.