Profitability Ebbs at Banc One, Northern Trust, and 1st Chicago

Rising rates, special charges, and ebbing fee income were behind profitability declines reported by several Midwest banking companies on Tuesday.

As a result of previously announced consolidation and portfolio restructuring charges, Columbus, Ohio-based Banc One Corp. saw its quarterly earnings fall 78.6%, to $64.4 million.

Detroit-based Comerica Inc. said quarterly profits rose 7.2%, to $96.6 million, but its annualized return on assets fell 6 basis points to 1.19%.

In Chicago, Northern Trust Corp. said a special accounting charge for retirement benefits lowered quarterly net income by 7.4% to $40.1 million. Its ROA fell by 21 basis points to 0.87%.

First Chicago Corp. said quarterly earnings rose by 0.35% to $173.4 million in what analysts characterized as a solid performance. Trading profits receded from exceedingly strong results of a year ago.

Wichita, Kan.-based Fourth Financial Corp. said quarterly net income rose 6.9% from restated results of a year ago, with an ROA of 1.15% - off 3 basis points.

Releasing final details of a previously announced restructuring, Banc One said it booked a pretax loss of $255 million on the sale of securities in the fourth quarter, along with $95 million of pretax consolidation charges.

John B. McCoy, Banc One's chairman and chief executive, said last year's results "did not meet expectations." But Mr. McCoy expressed confidence that the superregional would return "to traditional levels of Banc One performance" in 1995.

Prior-year results were restated to reflect the August stock-swap acquisition of Liberty National Bancorp, Louisville, Ky.

Dean Witter analyst Anthony Davis said he was encouraged by Banc One's fourth quarter. The company "put a tourniquet" on the issue of interest rate sensitivity, Mr. Davis said, while laying the groundwork for efficiency gains.

Despite taking $2 billion of credit card assets off the balance sheet via securitizations, Banc One expanded average total loans by 10.5% from a year ago. Loan yields fell by 12 basis points, however, to 9%.

First Chicago's 1994 results were fueled by "superior" credit card earnings, strong performances from core operations, and substantial venture capital gains, said chairman and chief executive Richard L. Thomas.

The banking company said managed credit card receivables rose 18% to $12.6 billion in 1994. Fourth-quarter card fee revenues of $234.8 million were up 19.4% from a year ago.

Quarterly average total loans of $24.3 billion rose 8.7% from a year ago, First Chicago said, with average loan yields rising 100 basis points, to 8.67%.

Comerica said quarterly average loans rose 13.6% from a year ago, to $21.4 billion. Margin compression helped limit growth in net interest income to 8.4%, however.

Although reported fee income fell slightly and overhead expenses rose slightly, Comerica said these line items were flat from a year ago, "excluding the effects of companies acquired and significant nonrecurring items."

Northern Trust said annualized quarterly returns equaled 13.62% on average common equity, down 373 basis points from 1993. For the full year, Northern earned $182.2 million, or $3.16 per share, versus 1993 earnings of $167.9 million, or $42.95 per share.

The $18.6 billion-asset banking company said an "unusually large" number of employees opted to retire in the fourth quarter, provoking an after-tax accounting charge of $5.9 million.

Quarterly trust revenues rose 9.5%, Northern said. Although average earning assets rose by 16%, margin compression limited growth in net interest income to 6%. Excluding the special accounting charge, overhead expenses rose 8% from a year ago.

Northern finished the year with $499.4 billion of trust assets under management or administration, up 4.8% from yearend 1993.

The $7.7 billion-asset Fourth Financial said annualized quarterly returns equaled 16.35% on common equity, up 62 basis points from a year ago. +++ First Chicago Corp. Chicago, IL Dollar amounts in millions (except per share) Fourth Quarter 4Q94 4Q93 Net income $173.4 $172.8 Per share 1.72 1.77 ROA 1.00% 1.19% ROE 16.5% 18.3% Net interest margin 2.40% 2.49% Net interest income 340.2 306.9 Noninterest income 488.8 523.0 Noninterest expense 482.1 481.9 Loss provision 76.0 70.0 Net chargeoffs 46.0 39.0 Full Year 1994 1993 Net income $689.7 $804.5 Per share 6.88 8.43 ROA 1.08% 1.42% ROE 17.0% 24.2% Net interest margin 2.58% 2.61% Net interest income 1,355.2 1,264.0 Noninterest income 1,874.6 2,204.4 Noninterest expense 1,918.6 1,858.1 Loss provision 224.0 270.0 Net chargeoffs 151.0 182.0 Balance Sheet 12/94 12/93 Assets $65,900 $52,560 Deposits 31,666 28,186 Loans 25,224 22,420 Reserve/nonp. loans 556% 292% Nonperf. loans/loans 0.52% 1.0% Nonperf. assets/assets 0.24% 0.53% Leverage cap. ratio 7.5% 8.0% Tier 1 cap. ratio 8.8% 8.8% Tier 1+2 cap. ratio 13.4% 13.6% Banc One Corp. Columbus, OH Dollar amounts in millions (except per share) Fourth Quarter 4Q94 4Q93 Net income $64.4 $300.2 Per share 0.15 0.74 ROA 0.29% 1.45% ROE 3.20% 17.14% Net interest margin 5.15% 5.98% Net interest income 1,022.3 1,100.3 Noninterest income 184.7 413.0 Noninterest expense 1,063.5 927.3 Loss provision 35.6 112.7 Net chargeoffs 91.7 121.3 Full Year 1994 1993 Net income $1,005.1 $1,191.5 Per share 2.42 2.93 ROA 1.15% 1.50% ROE 13.35% 17.58% Net interest margin 5.46% 6.19% Net interest income 4,276.8 4,370.4 Noninterest income 1419.6 1554.0 Noninterest expense 3,847.1 3,675.9 Loss provision 242.3 388.3 Net chargeoffs 316.9 389.5 Balance Sheet 12/94 12/93 Assets 88,922.6 $84,834.7 Deposits 68,090.0 65,022.4 Loans 61,992.9 57,520.4 Reserve/nonp. loans 253.3% 197.4% Nonperf. loans/loans 0.62% 0.85% Nonperf. assets/assts 0.52% 0.76% Leverage cap. ratio 8.29% 8.58% Tier 1 cap. ratio 9.74% 10.44% Tier 1+2 cap. ratio 13.01% 14.57% Comerica Inc. Detroit, Mich. Dollar amounts in millions (except per share) Fourth Quarter 4Q94 4Q93 Net income* $96.60 $90.1 Per share* 0.82 0.76 ROA* 1.19% 1.25% ROE* 16.20% 16.56% Net interest margin 4.23% 4.45% Net interest income 318.11 294.59 Noninterest income 122.63 131.30 Noninterest expense 278.97 276.92 Loss provision 12.00 14.00 Net chargeoffs 13.77 21.21 Full Year 1994 1993 Net income $387.24 $340.64 Per share 3.28 2.85 ROA 1.23% 1.25% ROE 16.74% 15.94% Net interest margin 4.32% 4.65% Net interest income 1,253.96 1,163.03 Noninterest income 466.64 462.50 Noninterest expense 1,058.67 1,038.47 Loss provision 56.00 69.00 Net chargeoffs 47.96 78.32 Balance Sheet 12/94 12/93 Assets $33,430 $30,295 Deposits 22,432 20,950 Loans 22,209 19,100 Reserve/nonp. loans 198.87% 187.88% Nonperf. loans/loans 0.74% 0.83% Nonperf. assets/assets 0.61% 0.69% Nonperf. assets/loans

+ OREO 0.92% 1.09% Leverage cap. ratio 6.93% 7.04% Tier 1 cap. ratio 8.13% 8.21% Tier 1+2 cap. ratio 11.68% 11.58% *Includes extraordinary items ===

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