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

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


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


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


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