First Union Corp. has raised the bar for its financial performance for the first time in several years.
Executives with the Charlotte, N.C.-based banking company told analysts and reporters Friday that it will modestly increase return on equity and other profitability benchmarks by 2000.
Edward E. Crutchfield, First Union's chairman, said the new profitability goals are part of a three-year strategic plan following its acquisition of First Fidelity Bancorp. in January.
Mr. Crutchfield also reaffirm the bank's current strategy of focusing more on internally generated growth than expansion through mergers.
"Acquisitions now go from being a strategic necessity in the past to an option in the future," Crutchfield said.
The $133.9 billion-asset company also predicts that a much larger portion of its revenues will come from its asset-management and capital- markets businesses - 40% versus the current 30%.
First Union's announcement followed a similar move by neighboring NationsBank Corp. this summer. After that $188 billion-asset company set higher targets, its stock climbed about $10 a share, analysts said.
Not so for First Union. Neither the company's increased emphasis on businesses generating fee-based income nor its financial goals came as a surprise to Wall Street, analysts said. And the stock already got a lift "earlier this week in anticipation of the meeting," said Anthony Davis, an analyst with Dean Witter Reynolds Inc.
When asked why the stock hadn't climbed on Friday, Mr. Crutchfield quipped, "Who knows? Because it's Friday, I guess."
Later, he elaborated. "We're telling the public we can do better, and we hope that has a positive effect on their stock price."
First Union simply "reiterated what has been their strategy for some time," according to Dennis F. Shea, an analyst with Morgan Stanley & Co.
On Friday, First Union raised its goals for return on equity to 20% from an earlier goal of 16% to 17%.
The company also raised its target for earnings-per-share growth to 13% from 10%, although its operating earnings of 20.78% for the first nine months this year have far exceeded those goals.
Still, First Union set the lower goal as one it can maintain for several years, according to a company spokesman.
First Union also increased its financial goal for its capital management business, which includes mutual-fund management, brokerage, trust and insurance businesses, to $1.15 billion in annual pretax net income by 2000.
The group made $220 million in 1995. Its capital markets business should make $760 million in pretax net income, up from $289 million last year.
First Union president Tony Terracciano called the revenue generated from such businesses "less volatile and cyclical. They are not subject to changes in loan demand, and in each of the businesses, there's great diversity."
