Citigroup Inc (C), U.S. Bancorp (USB): A Weak Revenue Environment Is Not a Problem for These Banks

During the first quarter, JPMorgan Chase & Co. (NYSE:JPM) reported a 33% increase in its mortgage application volumes and increased its market share from 10.6% to 11% over the prior year. Citigroup Inc (NYSE:C) originated mortgages worth $63 billion during the first quarter. Both Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) reported a surge in their mortgage originations during the quarter, while home lending volume dipped 12.8% year over year for Wells Fargo & Co (NYSE:WFC). U.S. Bancorp (NYSE:USB) maintained a 4% market share in mortgage originations, while Wells Fargo & Co (NYSE:WFC)’s share plunged to 22%.

Expense control will be the key

Given the revenue dampened situation, expense control was the primary lever during the first quarter. I believe it will continue to be a key differentiator in profitability in 2013. Expense savings tend to provide support to the bottom lines and banks are looking to pull the expense levers during times like these. Several banks have made good progress on this front during 2013. The ones who make progress this year will be the ones who provide value to their shareholders.

During the first quarter, Citigroup Inc (NYSE:C) produced an impressive 10% sequential decline in its non-interest expenses and US Bancorp’s plunged 8% over the same time frame. Going forward, Citigroup expects to fund a few of its acquisitions through the costs it saves. Therefore, you can expect continued cost saving programs being implemented at Citigroup. JPMorgan was able bring down its expenses by 4% over the prior quarter. Bank of America made some progress on this front as well. It saved $900 million during the full-year 2012 under its New BAC cost cutting program. It anticipates accumulated savings of $1.5 billion by this year end.

Foolish takeaway

The current revenue dampened environment creates a lot of headwinds for the large cap U.S. banks. However, Citigroup, JPMorgan, and US Bancorp are best placed to carry on under the given situation. These banks have shown some strength in their first-quarter results, and I believe they will continue to show strength. Therefore, I am bullish on these banks.

Adnan Khan has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup Inc (NYSE:C) and JPMorgan Chase & Co (NYSE:JPM).. Adnan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article A Weak Revenue Environment Is Not a Problem for These Banks originally appeared on Fool.com is written by Adnan Khan.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.