(Bloomberg News) Shrinking revenue at U.S. banks, led by Goldman Sachs Group Inc. and Citigroup Inc., may continue to fall as the industry heads into what could be its slowest period of growth since the Great Depression.
After the six largest U.S. banks posted record revenue in 2009, combined net revenue fell by an average of 8% in the third quarter from a year earlier and 16.3% over the last two quarters, according to data compiled by Bloomberg. Revenue so far this year is down by 4.1%, driven by declines in everything from trading at Goldman Sachs to home lending at Bank of America Corp. New laws restricting account and credit-card fees, as well as derivatives and capital rules, are also squeezing lenders.
Next year will kick off a decade that will bring the "worst revenue growth" for U.S. banks in 80 years, according to Mike Mayo, a banking analyst at Credit Agricole Securities USA Inc. in New York. Net revenue at U.S. commercial lenders has expanded at a slower pace in each of the last three decades, falling to 6% in the last decade from 12% in the 1970s, according to Federal Deposit Insurance Corp. data.
"Revenues aren't just weak for this quarter, or even for this upcoming year, but for the entire upcoming decade," said Mayo, a former Federal Reserve analyst who has more than 20 years of industry experience. "The speed limit's been lowered for how fast banks can drive earnings."
The trend over the last two quarters is hitting almost every line of income statements and is spread across the sector, affecting investment banks, consumer banks and commercial lenders. It's eating away at profits, depressing stock prices and threatening bonuses and new hiring.
The 17.6% drop in net revenue since March 31 at Charlotte, North Carolina-based Bank of America, the largest U.S. bank by assets, came mostly from its mortgage-lending and credit-card businesses. The company reported a $7.3 billion loss in the third quarter after taking a $10.4 billion goodwill writedown against new debit-card laws.
JPMorgan Chase & Co., where revenue dropped 13.9% over the same time frame, has been hurt by bad credit-card loans. Revenue from credit cards at the New York-based lender, the second-largest in the U.S., fell more than 17.6% in the third quarter from a year earlier.
The bank's revenue is also suffering, along with the rest of the industry, from new restrictions on the fees it can charge for credit cards, checking accounts and other consumer services. Chief Executive Officer Jamie Dimon, 54, told analysts Oct. 14 that the bank will lose about $750 million in profit as a result. He also said new derivatives rules will cost $1 billion in lost revenue.