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Big Banks Report Earnings This Week

ROBERT SIEGEL, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MELISSA BLOCK, HOST:

And I'm Melissa Block.

One of the biggest and most powerful companies on Wall Street, Goldman Sachs said today that it lost money in the last quarter. It's only the second time that's happened since Goldman went public 12 years ago.

NPR's Jim Zarroli reports on what those losses say about the challenges facing large banks.

JIM ZARROLI, BYLINE: Goldman says it lost nearly $400 million during the quarter that just ended. At the same time last year it made nearly $2 billion. Gary Townsend, of Hill Townsend Capital Management, says Goldman makes a lot of its money by investing. And some of the assets it owns, like shares in a Chinese bank, did poorly last quarter.

GARY TOWNSEND: They're very concentrated in capital markets. And when capital markets' operations are weak, as they were this past quarter, they won't do well.

ZARROLI: Townsend believes Goldman's troubles are temporary.

TOWNSEND: This company can make money. And in an improving economy, which I hope we finally see, they'll do very well again.

ZARROLI: But there's no doubt that the climate for big financial institutions has gotten a lot chillier lately. Bank of America said today that it made $6.2 billion last quarter, which was more than expected. But it made so much money by selling assets and by accounting changes. Revenue from credit card, real estate and investment banking all fell.

Keith Davis is an analyst at Farr, Miller and Washington.

KEITH DAVIS: The way I look at banks and the way I characterize them to people that ask are, they're really doing the opposite of hitting on all cylinders right now. They're really suffering on all cylinders right now.

ZARROLI: Davis says that over the past few years, the credit markets have been improving. Companies like Wells Fargo and Citigroup have increased lending. And as the credit markets have stabilized, banks have been able to lower their reserves, which is the amount they set aside for bad loans, and that's improved the bottom line at some big banks. But Davis says if the economy weakens too much the tide could turn again.

DAVIS: There's a school of thought out there that has housing prices fall, continue to fall, credit losses may increase going forward.

ZARROLI: Meanwhile, big banks are facing a more uncertain regulatory environment. For instance, a new Federal Reserve regulation known as the Volcker Rule will bar the kinds trading that federally insured banks can do. Big Wall Street firms like Goldman managed to survive and even thrive during the financial crisis, but making money in the future is going to be a more complicated matter.

Jim Zarroli, NPR news, New York. Transcript provided by NPR, Copyright NPR.