Banks' red ink shows U.S. consumers still bruised

By Jonathan Spicer

NEW YORK (Reuters) - Bank of America (BAC.N) and Citigroup (C.N) raised huge red flags on Friday with quarterly results that suggested the U.S. consumer remains sorely injured as the global recession drags on.

Both Bank of America, the largest U.S. bank, and Citigroup, No. 3, reported big increases in delinquencies among credit card customers and warned that things will get worse.

The results also indicated it will take time to scrub the worst effects of soured loans to mortgage and business customers off the banks' balance sheets.

"All in all, our quarter comes down to mortgage and credit card losses," said Citigroup Chief Executive Vikram Pandit. "Cards and mortgages are what we need to work through."

That could signal more trouble for an industry whose failures large and small helped drive the economy into recession 19 months ago, a downturn that shows little evidence of coming to an end.

"Credit issues are already serious, and we still haven't seen the full fallout from commercial real estate," said Bill Fitzpatrick, an analyst at Optique Capital Management in Milwaukee. "Bank of America and Citigroup have raised a lot of capital, which can help them stomach the losses we know are coming."

The banks' results contrast with much better performances reported earlier this week by Wall Street rivals Goldman Sachs Group Inc (GS.N) and JPMorgan Chase (JPM.N).

But the results didn't shock analysts and were enough to help financial stocks hang on to strong recent gains.