NEW YORK, NY--(Marketwire - Dec 6, 2012) - U.S. banking stocks have been on an impressive run in 2012. According to the Federal Deposit Insurance Corporation (FDIC) profits from U.S. banks in the third quarter were the best seen since the financial crisis. The KBW Bank Index (BKX) has gained 20 percent year-to-date, nearly double the S&P 500 Index's gain of 12 percent. The Paragon Report examines investing opportunities in the Banking Industry and provides equity research on Bank of America Corp (NYSE: BAC) and Citigroup Inc. (NYSE: C).
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The KBW Bank Index is on pace to best the broader markets for just the third time since 2003. U.S. banks collectively posted a net income of $37.6 billion in the third quarter, which is a 6-year high. Collective revenues in the third quarter grew 3 percent for the year prior, which was the largest gain seen in nearly three years, said the FDIC. This has been the 13th consecutive quarter in which industry profits have increased year-over-year.
"In previous quarters, we have noted that revenue growth has been very sluggish, and most of the improvement in earnings could be traced to lower provisions for loan losses," said FDIC Chairman Martin Gruenberg in a briefing. "Higher revenue contributed more to the increase in earnings than reduced provisions."
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Shares of Bank of America have recently topped the $10 mark, the first time since July 2011, and have gained nearly 90 percent year-to-date. CEO Brian T. Moynihan has sold over $60 billion in assets and plans to slash expenses by $8 billion. Moynihan has recently stated that he is confident the company will pass the upcoming "stress tests".
Citigroup has recently announced plans to cut their workforce by approximately 4 percent, or 11,000 jobs. "These actions are logical next steps in Citi's transformation," Chief Executive Michael Corbat said in a statement. "While we are committed to - and our strategy continues to leverage - our unparalleled global network and footprint, we have identified areas and products where our scale does not provide for meaningful returns."
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