A stronger-than-expected earnings report Wednesday apparently allayed investors' concern over First Chicago Corp.'s trading business, propelling the company's stock $1 higher, to $49.
"First Chicago did better in the second quarter than investors expected," said Sanford C. Bernstein & Co. money-center analyst Ronald I. Mandle. "I'm raising my estimate for this year 25 cents."
Sizable Trading Gain
The company reported second-quarter net income of $168.7 million, or $1.67 per share, fully diluted, compared with $168.5 million, or $1.72 per share, a year ago.
The earnings included a $37 million gain on trading for the quarter in contrast to a $25 million loss in the first quarter.
Mr. Mandle said the Chicago bank's quarterly earnings were impressive, but they weren't as spectacular as the bank made them out to be.
"Their core earnings were closer to my estimate of $1.40 per share, not-the $1.67 they reported because they included the Brazilian debt," he said.
During the second quarter, First Chicago received Brazilian bonds as part of a debt restructuring, adding $32 million to pre-tax earnings.
Less than Meets the Eye?
Prudential Securities analyst George Salem agreed that the bank's earnings were deceiving.
"First Chicago did a little better than expected," he said. "But it wasn't as good as the $1.67 would lead you to believe. They had no equity gains, as they normally do. I get about $1.35 or $1.40."
Barnett Banks Inc., which reported earnings in line with expectations, was up 12.5 cents on the day at $23.875.
Earlier in the week SunTrust Banks Inc. reported better than expected earnings - $1 per share - prompting another Bernstein analyst, Moshe Orenbuch, to raise his earnings estimate by 5 cents for this year and 10 cents for 1995.
Stock of SunTrust, which announced earnings Tuesday, was unchanged at $47.50 in the two days of trading since.
"SunTrust beat our estimates by 4 cents and showed better than expected earnings momentum," Mr. Orenbuch said.
'Under Tight Control'
"This was due to the positive effects of improving net interest income growth while expenses were kept under tight control."
Tuesday's announcements of earnings increases by SouthTrust Corp., Hibernia Corp., and Synovus Financial Corp., however, drew little reaction from investors.
Hibernia's stock initially lost 12.5 cents on the news, falling to $8.75. In trading Wednesday, the stock remained unchanged.
SouthTrust Corp. gained 25 cents to close at $20.25 Tuesday. IT gains another 25 cents on Wednesday.
Synovus fell 50 cents after its earnings were reported, dosing at $17.375. Its stock remained unchanged Wednesday.
High Hopes
Mr. Orenbuch said he is expecting strong earnings reports from NationsBank Corp., First Union Corp., and PNC Bank Corp. later this week.
"We would expect the best comparisons at these regionals," he said. They all have been rated "outperform" by the analyst.
Investors, however, seemed to be taking a wait-and-see attitude on those banks that have yet to report second-quarter earnings.
Among Mr. Orenbuch's recommendations, only NationsBank's stock was up, by 25 cents to $53.
Profit Taking Seen Unlikely
First Union was down 50 cents to $45.50 and PNC remained unchanged, trading at $28.375.
Prudential's Mr. Salem said he does not think investors will be taking profits as a result of the strong earnings reports.
"I don't see investors taking profits now because they'll probably hold out for falling interest rates," he noted.
"But we've had two good inflation reports. That would preclude any immediate Fed action."
