A sharp fall in trading revenues pushed Chase Manhattan Corp.'s first- quarter earnings down 29%, to $260 million.
But Bank of New York Co., relatively unaffected by market volatility, reported that profits soared 20%, to $212 million.
In what some analysts viewed as a response to pressure from shareholders, Chase chairman Thomas G. Labrecque promised Monday to accelerate current cost-cutting programs.
Mr. Labrecque said the full impact of these programs will not be felt until next year. A Chase spokesman said the bank will "give a lot of attention to productivity."
But analysts interpreted Mr. Labrecque's remarks to mean the bank would try to slice another 5% to 10% from operating costs. This may be the only way Chase can quickly improve on its first-quarter return on assets of 0.85% and return on equity of 13.4%.
Analysts also warned that Chase and other banks may come under increasing pressure from shareholders to improve results.
"They should recognize investors are very keen on seeing improved results from actions that are more dramatic than what management is typically intent on taking," said Diane Glossman, an analyst with Salomon Brothers Inc. "And if that means major corporate restructuring or acquisition, so be it."
Analysts gave Chase low grades for the quarter, even if earnings per share, at $1.29, came in higher than the $1.10 many had expected. They noted that had it not been for a number of exceptional gains, Chase's results would have been even more disappointing.
"Only marginally better than in the fourth quarter, which was miserable," said David Berry, a banking analyst with Keefe, Bruyette & Woods Inc.
"Things are not as rosy as they seem when looked at more closely, especially when it comes to core revenue issues," remarked Raphael Soifer, a banking analyst with Brown Brothers Harriman & Co.
"It's sure as hell not very inspiring," said Lawrence Cohn, an analyst with PaineWebber Inc. "True core operating earnings are dramatically weaker."
The analysts said Chase cannot count on continued results based on an extremely low loan-loss provision combined with extraordinary items such as $24 million from the sale of Latin American government securities, $36 million from the sale of a mortgage servicing portfolio, $18 million in recoveries on real estate loans, and higher-than-normal venture capital gains.
The loss provision of $65 million was well below the $120.7 billion- asset company's historical quarterly average of $133 million and is "clearly unsustainable," Mr. Cohn said.
Most of Chase's decline in earnings was due to the steep drop in trading revenues, to $94 million from $224 million a year ago.
Although revenues from foreign exchange trading and derivatives remained roughly even with last year, securities trading and underwriting showed a $92 million loss.
Net interest revenues fell 7% to $891 million, while fees and commissions from consumer banking, trust and fiduciary business, and investment banking rose slightly, to $469 million.
Exacerbating the downturn were operating expenses, which rose slightly to $1.08 billion.
On the bright side, excluding expenses related to voluntary retirement and other streamlining programs, Chase's operating expenses declined 4% from the fourth quarter's $1.27 billion, and earnings rose 13.5%.
"Year to year isn't the only measure," said Ms. Glossman. "And the decline in operating expenses is an affirmation that their efforts are bearing fruit."
At $52.3 billion-asset Bank of New York, much of the rise in first- quarter earnings came from a 27% increase in net interest income, to $502 million.
Net yield on interest-earning assets reached a quarterly record of 4.49%. That was 10 basis points higher than in the fourth quarter last year and 60 basis points higher than in the first quarter.
Noninterest income, including securities and other processing fees, trust and investment fees, securities gains, and foreign exchange trading fell slightly to $319 million, down 9% from the previous year.
Analysts expressed little surprise at Bank of New York's earnings improvement and predicted that profits are likely to stay at fairly impressive levels, barring a dramatic downturn in consumer spending.
"They're going to hang in till the next recession," said PaineWebber's Mr. Cohn, who raised his projected 1995 earnings for Bank of New York by 10 cents, to $4.35. +++ The Chase Manhattan Corp. New York Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $260 $364 Per share 1.29 1.80 ROA 0.85% 01.26% ROE 13.4% 20.2% Net interest margin 3.54% 4.13% Net interest income 891 958 Noninterest income 672 853 Noninterest expense 1,078 1,057 Loss provision 65 160 Net chargeoffs 62 156 Balance Sheet 3/31/95 3/31/94 Assets $120,722 $112,592 Deposits 68,297 68,626 Loans 64,135 61,635 Reserve/nonp. loans 220% 134% Nonperf. loans/loans 1.0% 1.7% Nonperf. assets/assets 0.70% 1.70% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 7.37% 7.28% Tier 1 cap. ratio 8.32% 8.43% Tier 1+2 cap. ratio 12.91% 12.94% The Bank of New York New York Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $213 $178 Per share 1.06 0.87 ROA 1.65% 1.50% ROE 19.98% 18.55% Net interest margin 4.49% 3.89% Net interest income 502 396 Noninterest income 319 350 Noninterest expense 416 403 Loss provision 50 45 Net chargeoffs 85 83 Balance Sheet 3/31/95 3/31/94 Assets $52,280 $48,879 Deposits 34,905 34,091 Loans 33,488 32,291 Reserve/nonp. loans 266.5% 266.7% Nonperf. loans/loans 0.84% 0.92% Nonperf. assets/assets 0.65% 0.72% Nonperf. assets/loans + OREO 1.00% 1.10% Leverage cap. ratio 8.1% 7.9% Tier 1 cap. ratio 8.59% 8.42% Tier 1+2 cap. ratio 13.34% 13.38% ===
