Picking up some of the customer fallout from consolidation among superregionals, smaller northeast regional banks and thrifts continued to report generally strong earnings.
Banking companies such as State Street Boston Corp. and HSBC Americas Inc. registered strong improvement. Smaller companies like Pennsylvania's Sovereign Bancorp, New York's Onbancorp, and New Jersey's Hubco reported respectable improvements in operating earnings but lower net profits as a result of special provisions.
Analysts said that after taking out special provisions, most banks held up fairly well despite a generally slow economic environment.
A number of banks enjoyed fairly strong improvement in loan demand largely through acquisitions or by picking up fallout from consolidation.
"Revenue growth is generally slowing but most banks are meeting our numbers" said Marni Pont, a bank analyst in New York with Keefe, Bruyette & Woods Inc.
She and other analysts noted that ongoing tight cost control and share buybacks are helping boost earnings per share at many institutions even as loan growth appears to be peaking."Cost control will be an ongoing factor for many institutions as we go into 1997," said Frank Barkocy, a banking analyst with Josephthal, Lyon & Ross Inc.
He noted that efficiency ratios - the ratio of operating costs to revenues - have already "broken through the 60% level and are working their way down to the mid-50 level."
State Street Boston Corp.
The parent of State Street Bank and Trust Co. posted a 14% rise in net income to $74 million, confirming that the bank's big new push into international operations is meeting with growing success.
"Cross-border investing continues to increase around the world," observed Marshall N. Carter, chairman and chief executive.
"As a global company that settles securities in 72 markets, we are well positioned to benefit from this trend."
Earnings per share came in at 90 cents, a penny above consensus forecasts. State Street, which focuses on asset management, securities processing, and global custody, has been steadily expanding its operations outside the United States, extending a consolidation in areas like securities settlement and custody that is already well advanced here.
"Global business is the growth driver, and I suspect it will be for the foreseeable future," said Thomas Theurkauf, a banking analyst with Keefe, Bruyette & Woods.
"U.S. pension fund managers are certainly looking to diversify their investment portfolios and (State Street) and a handful of other players are well positioned to take advantage of this trend."
The bank has offices in 15 countries and recently set up a joint venture with Unit Trust of India to provide accounting services to the $33 billion Indian mutual fund market. State Street also recently applied to open a representative office in India and entered into a strategic alliances with Bank of Ireland to provide custody, accounting and administrative services to offshore mutual funds registered or managed in Dublin.
As of Sept. 30, State Street had a combined $2.7 trillion in assets under custody, up 30% over the $2.1 trillion a year ago, and $280 billion in assets under management, up 40% over the $199 billion a year ago. Ron O'Kelley, chief financial officer, noted that although U.S. earnings accounted for the bulk of profits, international earnings are providing an increasingly strong stimulus.
"There's been an overall improvement but international continues to grow faster than the rest," Mr. O'Kelley said.
Without disclosing specific figures, State Street reported that non-U.S. assets managed for U.S. customers rose 39% over the year-earlier period, assets under custody for non-U.S. customers increased 49%, and non-U.S. assets managed for all customers rose 67%.
HSBC Americas Inc.
The parent company of Buffalo-based Marine Midland Bank posted a 25% rise in net earnings to $101 million that was driven by higher net interest income resulting from acquisitions which boosted total assets 12% to $22.2 billion. The earnings increase translated into a 22% return on equity, up from 18.6% a year earlier.
Total interest income rose by more than 10% to $416 million, and total noninterest income 7% to $327 million. Total noninterest expenses were up only 2.5%, to $174 million.
HSBC has been steadily expanding through acquisitions while keeping a tight lid on costs. Much of the increase in growth reflected the acquisition of 13 New York City branches - two from Hang Seng Bank and 11 from East River Savings Bank. Two pending acquisitions announced in the third quarter - of First Federal Savings and Loan Association of Rochester and J.P. Morgan & Co.'s U.S.-dollar clearing business - will further add to growth, said HSBC Americas chief executive James H. Cleave.
Sovereign Bancorp
In Pennsylvania, $9 billion asset Sovereign Bancorp posted a 20% rise in operating income to $17.3 million before a nonrecurring after-tax charge of $17.2 million for recapitalization of the Savings Association Insurance Fund.
The charge badly battered Sovereign's results, cutting net earnings to a mere $28,000. Jay S. Sidhu, the thrift's president and chief executive, emphasized that its tangible returns remained unaffected by the one-time charge and that the company will continue to use earnings to develop itself as a super community bank.
Sovereign added that the super community strategy, which targets consumer and small-business markets, should help increase interest income by helping the bank develop more-profitable consumer and commercial banking business.
"Excluding the SAIF assessment, Sovereign's operating earnings at 29 cents matched forecasts," said Ryan, Beck & Co. analyst Elizabeth Summers.
"I'm very positive because their management team is capable delivering on their promises," she added
"They have realized there is no future for pure thrifts and are adapting to their environment."
Onbancorp
Onbancorp, a $5.4 billion-asset multibank holding company based in Syracuse, posted net income of $7.3 million, down 42.5%. from the 1995 third quarter.
Excluding a $5.1 million thrift fund charge, net income would have been $12.4 million, down just slightly.
But analysts said they were looking at earnings on an operating basis, which showed a solid quarter.
"On a core basis, stripping out the SAIF charge and related nonrecurring tax items, their numbers are quite good," said Kevin Timmons, a regional- bank analyst with First Albany Corp.
Onbancorp's reported earnings per share of 84 cents for the quarter was well above analysts' consensus of about 76 cents.
Hubco
Mahwah-based Hubco, New Jersey's third-largest independent commercial bank with $2.7 billion in assets, reported $9.3 million in net earnings, up 8% over the previous year. Including one-time merger and restructuring related charges of $7.5 million for the acquisition of Lafayette American Bank and Trust Company and $512,000 in special charges for the thrift fund, net earnings totaled $1.3 million.
Hubco, parent company of Hudson United Bank, has embarked on an ambitious program to expand in Connecticut and is expected to close two additional acquisitions in that state.
"The northern New Jersey market is fairly flat and commercial loan demand is picking up only slightly, " observed Ms. Pont.
"Much of (Hubco's) growth is being driven by acquisitions."
RCSB Financial Inc.
The $4 billion asset holding company for Rochester Community Savings Bank in western New York reported a 12.8% increase in net earnings to $11 million for its fiscal third quarter, ended Aug. 31. Earnings per share, which rose 32.7% to 69 cents, included a 9 cent net gain from the third- quarter sale of the thrift's mortgage servicing unit.
Leonard S. Simon, RCSB's chairman, president, and chief executive, said the results "reflect both higher core earnings and the favorable effect of balance-sheet management, including repurchase of stock and a gain on the sale of the mortgage servicing unit."
U.S. Trust Corp.
The holding company for United States Trust Company of New York reported net earnings of $10.2 million, or 97 cents a share, marking a sharp turnaround from the $73.7 million loss registered last year.
The 1995 third-quarter results included a $81.6 million after-tax charge for the sale of the $3 billion-asset bank's securities processing business.
Total fee revenues rose 12.5% to $62.2 million, of which the better part came from a 16.3% rise in fees for assets under management, to $48.2 million. Net interest revenues fell to $19.4 million from $26.5 million a year earlier. Operating expenses fell sharply - to $64.3 million from $89.2 million - while total assets under management rose nearly 14%, to $50 billion.
