First Union, Wachovia, Morgan in Plus Column

Fee income and the Southeast's strong economy fueled healthy earnings gains at First Union Corp. and Wachovia Corp. in the third quarter.

Wachovia's net income was up 10% to $151.3 million, and First Union's 6% to $255 million.

Meanwhile, stronger trading and corporate finance revenues helped J.P. Morgan & Co. in New York continue its recovery from trading-related problems. Its third-quarter earnings rose 10%, to $360 million.

"The First Union quarter was just awesome in terms of fee momentum," said Dean Witter analyst Anthony R. Davis. "Wachovia had a pretty solid quarter," he added.

Mr. Davis and other analysts said First Union's strong showing means the Charlotte-based company is on track to meet or exceed financial goals it set after agreeing to merge with Newark, N.J.-based First Fidelity Bancorp. The merger is scheduled to close by Jan. 1.

First Fidelity's third-quarter earnings were up 9%, to $125.6 million, the company reported Wednesday.

At Morgan, the earnings improvement came despite a 38% drop in securities gains. Trading and related net interest revenues rose 22%, to $434 million; corporate finance revenues rose 81%, to $195 million; and investment management fees rose 13%, to $150 million.

Analysts praised the results, saying they reflected the payback from Morgan's substantial investments in an integrated global trading, investment banking, and corporate finance operation.

"This shows they've gotten to better understand what their opportunities are, and are exploiting their client base," said Lawrence R. Vitale, an analyst with Bear Stearns & Co.

Added Lawrence Cohn of PaineWebber Inc., "The results certainly suggest they're starting to realize on the investment they've made in those businesses."

The improved results follow an earnings setback for Morgan last year, when trading and underwriting revenues fell in the wake of a sharp rise in interest rates.

Total revenues for the third quarter increased 8% to $1.5 billion, and operating expenses rose 9%, to slightly over $1 billion. Assets reached $178 billion, up 6.6% from the previous quarter. Testifying to its asset quality, Morgan made no provisions for credit losses in the quarter.

Fee income stood out at both North Carolina-based banks, $87 billion- asset First Union and $44 billion-asset Wachovia. It surged 20% at First Union, to $362.8 million, and 12% at its cross-state rival, to $170.7 million.

First Union cited key contributions from its capital markets group - particularly loan syndication and asset securitization volume - and its capital management division, which includes mutual funds, trust and brokerage services.

"All the promises they had made regarding the capital markets area - and the capital management area - seem to be borne out," said analyst Nancy Bush with Brown Brothers Harriman.

Wachovia's capital markets division also reported some gains related to the closing of structured lease transactions.

Net interest income grew at both companies on the strength of strong loan growth, both commercial and consumer. Wachovia achieved a 13% annualized growth rate, First Union 12% excluding acquisitions.

"The southeastern economy is pretty good, particularly in the markets we're in," said Wachovia's chief financial officer, Robert S. McCoy Jr.

- Kenneth Cline, James R. Kraus, and Jacqueline S. Gold +++

Wachovia Corp. Winston-Salem, N.C. Dollar amounts in millions (except per share) Third Quarter 3Q95 3Q94 Net income $151.3 $138.0 Per share 0.87 0.80 ROA 1.42% 1.48%ROE 17.47% 17.73% Net interest margin 4.11% 4.30% Net interest income 394.2 358.0 Noninterest income 170.7 152.0 Noninterest expense 298.9 271.3 Loss provision 23.2 18.1 Net chargeoffs 23.1. 18.1 Year to Date 1995 1994 Net income $456.3 $397.0 Per share 2.64 2.30 ROA 1.49% 1.44% ROE 18.14% 17.26% Net interest margin 4.21% 4.33% Net interest income 1,148.1 1,052.5 Noninterest income 546.8 450.9 Noninterest expense 888.5 815.9 Loss provision 73.6 52.2 Net chargeoffs 71.1 51.0 Balance Sheet 9/30/95 9/30/94 Assets $44,101.0 $38,134.0 Deposits 25,283.0 22,256.0 Loans 29,012.0 24,968.0 Reserve/nonp. loans 710% 455% Nonperf. loans/loans 0.20% 0.36% Nonperf. assets/assets NA NA Nonperf. assets/loans + OREO 0.26% 0.44% Leverage cap. ratio 8.32% 8.51% Tier 1 cap. ratio 9.30% 9.40% Tier 1+2 cap. ratio 12.90% 13.00%

First Union Corp. Charlotte, N.C. Dollar amounts in millions (except per share) Third Quarter 3Q95 3Q94 Net income $255.0 $235.2 Per share 1.50 1.35 ROA 1.16% 1.31% ROE 17.71% 17.29% Net interest margin 4.37% 4.84% Net interest income 880.5 799.3 Noninterest income 362.8 303.3 Noninterest expense 770.9 682.2 Loss provision 49.0 25.0 Net chargeoffs 50.1 47.2 Year to Date 1995 1994 Net income $734.0 $675.3 Per share 4.27 3.94 ROA 1.21% 1.29% ROE 17.39% 17.45% Net interest margin 4.52% 4.80% Net interest income 2,435.0 2,254.4 Noninterest income 1,004.5 857.1 Noninterest expense 2,170.4 1,973.3 Loss provision 125.5 75.0 Net chargeoffs 156.8 110.1 Balance Sheet 9/30/95 9/30/94 Assets $86,834.0 $74,243.0 Deposits 59,815.0 53,687.0 Loans 60,900.0 50,629.0 Reserve/nonp. loans 204% 203% Nonperf. loans/loans 0.71% 0.96% Nonperf. assets/assets 0.65% 0.88% Nonperf. assets/loans + OREO 0.91% 1.26% Leverage cap. ratio 5.10% 6.77% Tier 1 cap. ratio 6.32% 8.84% Tier 1+2 cap. ratio 10.70% 14.20%

J.P Morgan & Co. New York Dollar amounts in millions (except per share) Third Quarter 3Q95 3Q94 Net income $360.0 $327.0 Per share 1.78 1.63 ROA 0.82% 0.76% ROE 14.90% 13.90% Net interest margin 1.60% 1.71% Net interest income 534.0 556.0 Noninterest income 1,042.0 906.0 Noninterest expense 1,022.0 941.0 Loss provision 0.0 0.0 Net chargeoffs 0.0 (8.0) Year to Date 1995 1994 Net income $930.0 $1,022.0 Per share 4.62 5.05 ROA 0.71% 0.79% ROE 13.20% 14.50% Net interest margin 1.62% 1.56% Net interest income 1,598.0 1,552.0 Noninterest income 2,871.0 2,826.0 Noninterest expense 3,008.0 2,729.0 Loss provision 00.0 00.0 Net chargeoffs 1.0 (25.0) Balance Sheet 9/30/95 9/30/94 Assets $178,331.0 $154,668.0 Deposits 46,678.0 45,557.0 Loans 25,265.0 22,582.0 Reserve/nonp. loans 605.3% 534.4% Nonperf. loans/loans 0.70% 0.90%Nonperf. assets/assets 0.11% 0.14% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 6.3% 6.5% Tier 1 cap. ratio 8.4% 9.8% Tier 1+2 cap. ratio 12.40% 14.70% ===

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