Four large regional banking companies reported third-quarter profit gains of more than 20% each, thanks to solid increases in both net interest income and fees.
NationsBank Corp. notched a 23% gain, to $530 million; First Interstate Bancorp was up a whopping 83%, to $237.8 million; Bank of New York Co. jumped 21%, to $234 million; and First Chicago Corp. climbed 35%, to $207 million.
One exception to the trend was Chase Manhattan Corp. Its earnings fell 7%, to $283 million, because of extraordinary gains in the third period last year.
Bankers and analysts hailed Monday's reports as strong signs of the industry's ability to make money.
"Our results this quarter were driven by a significant increase in core earnings power, leading to improved profitability," said James H. Hance Jr., NationsBank's chief financial officer.
NationsBank's return on assets reached 1.10% and return on equity hit 18.29%, compared with 1.02% and 16% during the year-ago period. Meanwhile, noninterest expense fell to 57% of revenues, down 5.72 percentage points.
"The company is finally hitting on all cylinders," said Merrill Lynch's Judah S. Kraushaar.
Contributing to the improvements were a 7% gain in net interest income, to $1.4 billion; a 20% jump in fee income, which reached $776 million; and a 16-basis-point improvement in the net interest margin from the previous quarter.
First Chicago's chief financial officer, Robert A. Rosholt, heralded his bank's results as "the best fundamental performance in First Chicago's history." The company is scheduled to merge with Detroit's NBD Bancorp by yearend.
Mr. Rosholt spent most of his time during a conference call with analysts addressing an uptick in delinquencies at First Chicago's $15 billion card portfolio. The net chargeoff rate for the bank's managed credit card receivables reached 4%, compared with 3.5% a year earlier.
As a result, the provision for credit losses rose 82%, to $100 million, during the period.
"The fundamental chargeoff rate is clearly going up," Mr. Rosholt said. But at the same time, he said, First Chicago continued to view credit cards - a key source of earnings - as a good business.
Analysts expressed some disappointment with Chase's third-quarter showing, noting that the bank failed to generate any notable improvement in earnings.
"Overall, apart from strong trading and investment banking, I would characterize results at Chase as lackluster," said Raphael Soifer, a banking analyst with Brown Brothers Harriman & Co. in New York.
Chase noted that its earnings were boosted last year by a number of special items, including the sale of real estate assets and developing- country investment securities.
The $120 billion-asset bank is scheduled to merge with Chemical Banking Corp. in the first quarter of next year, creating the biggest bank in the United States, with nearly $300 billion in assets.
Bank of New York's net income improved despite a 30% rise in interest expense, to $435 million. Noninterest expense was up only 1%, to $424 million.
Much of the increase in earnings at Bank of New York came from a record $521 million in net interest income, up 14% from a year ago. The bank said loan demand continued to strengthen across the board and net interest rate spread and yields set new record highs. Credit card outstandings also rose by 11%, to $8 billion.
In securities processing, another large source of revenue for Bank of New York, fees increased 14% to $103 million, mainly from increased transactions in American Depositary Receipts, corporate trust, mutual funds custody, and master trust activities.
At Los Angeles-based First Interstate, analysts took heart from the $55 billion-asset institution's strong expense controls. Total expenses of $532.7 million were flat with the previous year, if a one-time after-tax gain of $14 million from an insurance premium refund and a $3.9 million restructuring charge are excluded.
Noninterest income of $280.5 million was also seen as a strong contributor, even though it declined a half million dollars from last year. First Interstate noted that if the figures were adjusted for the sale earlier this year of a money management unit called Denver Investment Advisors Inc., fee income would have been $4.9 million higher.
Kenneth Cline, Barton Crockett, James R. Kraus, and Jacqueline S. Gold contributed to this report. +++
NationsBank Corp. Charlotte, N.C. Dollar amounts in millions (except per share) Third Quarter 3Q95 3Q94 Net income $530.0 $431.0 Per share 1.93 1.54 ROA 1.10% 1.02% ROE 18.29% 16.00% Net interest margin 3.35% 3.54% Net interest income 1,420.0 1,330.0 Noninterest income 776.0 649.0 Noninterest expense 1,245.0 1,234.0 Loss provision 100.0 70.0 Net chargeoffs 99.0 64.0 Year to Date 1995 1994 Net income $1,440.0 $1,285.0 Per share 5.19 4.62 ROA 1.03% 1.05% ROE 17.02% 16.61% Net interest margin 3.31% 3.64% Net interest income 4,122.0 3,979.0 Noninterest income 2,232.0 1,958.0 Noninterest expense 3,821.0 3,681.0 Loss provision 240.0 240.0 Net chargeoffs 265.0 218.0 Balance Sheet 9/30/95 9/30/94 Assets $182,138.0 $170,912.0 Deposits 97,870.0 96,735.0 Loans 113,343.0 97,330.0 Reserve/nonp. loans 256% 256% Nonperf. loans/loans 0.75% 0.89% Nonperf. assets/assets 0.57% 0.75% Nonperf. assets/loans + OREO 0.90% 1.29% Leverage cap. ratio 5.96% 6.32% Tier 1 cap. ratio 7.16% 7.48% Tier 1+2 cap. ratio 11.23% 11.57%
Chase Manhattan Corp. New York Dollar amounts in millions (except per share) Third Quarter 3Q95 3Q94 Net income $283.0 $305.0 Per share 1.40 1.49 ROA 0.89% 0.98% ROE 13.90% 15.80% Net interest margin 3.46% 3.74% Net interest income 892.0 922.0 Noninterest income 717.0 727.0 Noninterest expense 1,079.0 1,067.0 Loss provision 70.0 100.0 Net chargeoffs 78.0 119.0 Year to Date 1995 1994 Net income $825.0 $976.0 Per share 4.07 4.76 ROA 0.88% 1.09% ROE 13.80% 17.30% Net interest margin 3.50% 3.89% Net interest income 2,671.0 2,803.0 Noninterest income 2,139.0 2,381.0 Noninterest expense 3,261.0 3,197.0 Loss provision 210.0 410.0 Net chargeoffs 217.0 422.0 Balance Sheet 9/30/95 9/30/94 Assets $120,092.0 $117,065.0 Deposits 69,433.0 68,922.0 Loans 64,821.0 61,405.0 Reserve/nonp. loans 232% 202% Nonperf. loans/loans 0.93% 1.14% Nonperf. assets/assets 0.64% 1.03% Nonperf. assets/loans + OREO 1.18% 1.96% Leverage cap. ratio 7.47% 7.31% Tier 1 cap. ratio 8.24% 8.51% Tier 1+2 cap. ratio 13.01% 13.22%
First Chicago Corp. Chicago Dollar amounts in millions (except per share) Third Quarter 3Q95 3Q94 Net income $207.2 $143.8 Per share 2.12 1.51 ROA 1.08% 0.92% ROE 18.80% 15.00% Net interest margin 2.36% 2.49% Net interest income 375.2 340.8 Noninterest income 559.0 455.1 Noninterest expense 502.5 491.4 Loss provision 100.0 55.0 Net chargeoffs 46.0 38.0 Year to Date 1995 1994 Net income $589.7 $516.3 Per share 6.00 5.17 ROA 1.07% 1.10% ROE 18.30% 17.10% Net interest margin 2.45% 2.64% Net interest income 1,120.3 1,015.0
Noninterest income 1,516.8 1,385.8 Noninterest expense 1,468.3 1,436.5 Loss provision 235.0 148.0 Net chargeoffs 135.0 105.0 Balance Sheet 9/30/95 9/30/94 Assets $75,747.0 $65,747.0 Deposits 33,235.0 29,670.0 Loans 27,663.0 23,817.0 Reserve/nonp. loans 550% 444% Nonperf. loans/loans 0.51% 0.66% Nonperf. assets/assets 0.18% 0.27% Nonperf. assets/loans + OREO 0.50% 0.70% Leverage cap. ratio 6.90% 7.80% Tier 1 cap. ratio 8.40% 9.20% Tier 1+2 cap. ratio 12.40% 13.90% ===
