USA Commercial Banks
The first quarter of 2009 was marked by record trading revenues for the US commercial banking sector
. Interest rate products brought wide trading margins and subsequent gains, helping banks generate a total of $9.8 billion revenue, mainly from trading cash instruments and derivatives. These results are encouraging, especially when compared to the $9.2 billion loss in the last quarter of 2008. In fact, the only asset that generated loss ($3.2 billion) was credit trading.
The largest commercial banks, Bank of America Corp
, JP Morgan Chase & Co
, HSBC Bank
, and Goldman Sachs Group accounted for 96 percent of all exposures and had the largest share of derivative exposures of the commercial banking
sector in the United States.
Among the banking behemoths, JP Morgan Chase & Co is one of the best reputed and oldest institutions in the USA. Incorporated in 1799, the bank has specialized in asset and wealth management, corporate and private banking, investment, treasury and securities services, and insurance services. Operating in 60 countries, JP Morgan boosts the third largest US deposit base. In 2009, the bank announced plans to hire and deploy loan officers in 23 US states, among which Texas, Florida, and California. The new task force of 1200 officers will cooperate with builders, estate agents, and personal bankers to boost the home loan sales by envisioned 60 percent. Despite the weak housing market, JP Morgan has fared better than other large mortgage lenders such as Citigroup and Bank of America. In fact, the bank emerged as a key player in the business with home loans.
The Bank of America is the largest US commercial bank by deposits and the number one bank in terms of assets. The bank businesses include wealth and investment management, as well as investment, corporate, and consumer banking. Its consumer base has expanded to 53 million corporate and individual clients while its total revenues amounted to more than $113 billion in 2008. In December 2009, the Bank of America responded to President Obama’s demand to help the small businesses and pledged to expand its lending to medium sized and small businesses. The bank promised to increase its lending by $5 billion in 2010. At present, the Charlotte-based bank is the second largest lender to small businesses in the United States. The Small Business Administration Program of the Bank of America made loans in the amount of $121.4 million in 2008. The number of loans was reduced from 3.354 to just 308 in 2009, and loans backed by the program totaled just $17.6 million.
Citigroup is another large commercial bank with national and international presence. The banking institution runs 16.000 offices in 140 countries. In 2009, Citigroup split into two entities, following two federal bailouts and change of senior executives. Citi Holdings is a branch involved in asset management and brokerage while Citicorp offers transaction services, underwriting and corporate loans, market making solutions, and fund management. After a third bailout and investment of $45 billion by the federal government in February, taxpayers turned into the largest shareholder in Citigroup. In December, the bank announced plans to replace the remaining bailout, worth $20 billion, with financing coming from private investments.
HSBC Bank is a US subsidiary of HSBC Holdings UK
and one the largest commercial banks in the United States. The bank offers a comprehensive range of products and services such as savings, mortgages, investments, credit cards, insurances, as well as international services. In 2004, the bank developed an external segmentation scheme that helped in soliciting new customers. By identifying the needs and buying habits of its 1.4 million clients, the bank was successful in doubling its sales. Accurate customer targeting and contacting of clients that fit a predictive profile reduced the bank’s costs by 30 percent. In a further effort to increase its costumer base in December 2008, the bank announced decrease in its reference and prime rate to 4.00% and 3.25%. In 2005, the bank made one of the largest commitments to the use of renewable energy. HSBC turned to wind energy to meet 30 percent of its electricity needs. Furthermore, the bank runs Accommodation program to offer assistance to employees with disabilities. Examples of accommodation requests which were catered for include special chairs for persons with recent back surgeries and securing wheelchair access at various locations.
The Goldman Sachs Group is a commercial bank, engaged in investment management, mergers and acquisitions advice, security services, investment banking, and other services that mainly target institutional clients. Headquartered in Lower Manhattan, the company has presence in all international financial hubs. For decades, the banking institution housed some of the largest hedge funds and private entity funds. In 2008, Goldman Sachs was transformed into a commercial bank, after federal bailout. In July, the bank announced $3.44 billion net profits (for the second quarter) while in October, Goldman Sachs reported profits of $3.19 billion. Goldman has a policy of rewarding its employees generously in order to prevent defections to rival banks. In 2009, the bank has committed a total of $16.7 billion to pay its officials, translating into $700,000 per employee. Its top producers are going to earn millions.
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