Several of the country's largest banks reported impressive fourth- quarter earnings gains Wednesday, backed by fee income and loan growth. But credit card chargeoffs remained an issue.
San Francisco-based BankAmerica Corp., helped by a rebounding California economy, said its profits jumped 6%, to $747 million. The nation's third- largest banking company reported significant loan growth in its home state, a marked change.
"This was the quarter when we saw a pickup in the long-awaited California loan demand, and that bodes well for the future," said Michael E. O'Neill, chief financial officer.
First Chicago NBD Corp., enjoying a 5% gain in loans, reported earnings of $377 million - a 199% jump from the charge-ridden fourth quarter of 1995.
Analysts voiced some concern, however, over First Chicago's credit card chargeoff rate, 6.7%. "Clearly, the (consumer) bankruptcy issue has resumed after a little bit of a lull in the third quarter," said Joseph Duwan, an analyst at Keefe, Bruyette & Woods Inc. First Chicago's high chargeoffs "underscore the credit cost issue as being a challenge for banks in 1997," he added.
Earnings gains were also reported by Fleet Financial Group, PNC Bank Corp., Republic New York Corp., and Wachovia Corp.
"We've seen stronger fee income than we thought, and we've seen strong interest income as well," said Anthony R. Davis, senior vice president of Dean Witter Reynolds Inc. But "we still see a pretty heavy toll in consumer chargeoffs."
BankAmerica Corp.
BankAmerica's earnings per share jumped to $1.93, compared with $1.74 in the fourth quarter 1995. The results beat analysts' consensus estimates by 3 cents, giving Wall Street further confidence in David Coulter, who took over as chairman a year ago.
"There's nothing heroic or startling about these results other than that they continue to make steady progress," said Arthur P. Soter, a banking analyst at Morgan Stanley & Co. "They are making believers of the investment community."
The bank's stock closed Wednesday's trading at $107.50, up $5.75.
Aside from the pickup in loan volume, revenue growth was aided by a 29% increase in noninterest income to $341 million. The bulk of the gain came from increased fees and commissions, dividends on investment securities and gains on the sale of leased property, the bank said.
BankAmerica also continued its aggressive stock buyback program, repurchasing 4.7 million shares in the quarter, reducing shareholder equity by $450 million. The bank said it bought back 17 million shares in all of 1996.
The bank had two significant nonrecurring items in the quarter, a $147 million gain on the initial public offering of BA Merchant Services Inc. and a $280 million restructuring charge to cover 3,700 layoffs.
"They plugged into a lot of trends for the quarter," said Chip Dickson, banking analyst with Smith Barney. "Delinquencies are still an issue but reserve coverage remains good. It was generally a pretty solid quarter."
First Chicago NBD Corp.
First Chicago NBD Corp. said fee income and expense control helped boost earnings per share to $1.14, compared with 37 cents a year ago. First Chicago was 1 cent shy of analysts' consensus estimates.
The $104.6 billion-asset First Chicago said fee income overall grew 4%, but the company was helped more by the reduction of expenses. Excluding costs a year ago of $267 million associated with the merger of First Chicago and NBD, the Chicago company still managed to cut noninterest expenses by 1%. That's important, analysts said, because First Chicago, which has met its cost-cutting goals related to the transaction, can move past the merger and focus on its overall strategy.
Credit cards continued to be very profitable for First Chicago. The bank said the business exceeded a 30% return on equity for 1996, despite the heavy chargeoffs.
For the year, First Chicago boosted income 25% to $1.4 billion, or $4.32 per share.
First Chicago's shares were up 87.5 cents to $55 on Wednesday.
Fleet Financial Group
Boston-based Fleet reported fourth quarter earnings of $302 million, compared to a $138 million loss in the same quarter of 1995.
Earnings per share of $1.05 were 2 cents less than analysts' estimates.
Analysts said the report reflected slow economic growth in Fleet's home territory.
"The market in the Northeast is growing in a less robust manner than it is in South," said Thomas D. McCandless, an analyst with Natwest Securities Corp.
Fleet also said Wednesday it plans to sell off three businesses: Option One Mortgage Corp., the bank's subprime specialty mortgage unit; an indirect auto lending portfolio; and the bank's corporate trust unit.
The sales would fit into Fleet's strategy to scale back business lines and focus on core regional banking. Last year, the bank sold Fleet Finance and Fleet Real Estate Capital.
The $85 billion-asset bank also said it would repurchase up to 20 million shares of its stock, equaling about $7.55 billion.
Fleet's stock fell 62.5 cents on Wednesday to close the day at $51.625.
PNC Bank Corp.
PNC reported quarterly net income of $271.9 million, or 79 cents per share, compared with a loss of $176 million a year ago. Earnings per share exceeded analysts' expectations by 1 cent.
PNC credited the improvement to growth in its fee businesses and a restructuring of its balance sheet, including the elimination of lower- yielding assets, mostly securities.
The biggest struggle for PNC is trying to get loan growth from its Midwest and Mid-Atlantic regions, said ABN Amro Chicago Corp. analyst James M. Schutz. "Getting loans out of Pittsburgh is like pulling teeth," Mr. Schutz said.
PNC is trying to launch a national campaign to sell bank products to American Automobile Association members, but that program has yet to produce higher revenues.
PNC's fee businesses, such as asset management, trust and mortgage banking, in addition to service charges, helped boost noninterest income to $389 million compared to $23 million in the fourth quarter a year ago.
Loans at the $73.3 billion-asset Pittsburgh company were up only 2% from a year ago, but lower interest expenses helped boost net interest income by 12%.
Noninterest expense was down from a year ago, but only because the fourth quarter of 1995 included special charges of $260 million associated with merger expenses and other restructuring costs.
PNC reported $992.2 million for year, more than twice the $408.1 million in 1995.
The bank's shares were down 37.5 cents to $38.375 on Wednesday.
Republic New York Corp.
Republic New York Corp. reported a 14% fourth quarter earnings jump to $108.5 million, thanks in part to increased loan volume related to its acquisition last year of Crossland Savings Bank. The $47 billion-asset bank also benefited from growth in its international private banking business.
On a per-share basis, the bank reported net income of $1.82 a share, compared to $1.54, a year earlier.
The results beat analysts' consensus estimates by 3 cents.
Republic also said Wednesday it would increase its stock dividend by 21% to 46 cents a share, payable on April 1 to stockholders of record as of March 15.
"A 21% increase is unusual for this company or any company, but they have plenty of capital to afford it," said Diane Glossman, an analyst with Salomon Brothers.
Republic's stock closed the day at $83.625, up 25 cents.
Wachovia Corp.
Winston-Salem, N.C.-based Wachovia posted fourth quarter net income of $170.1 million, up 16.8%.
Per share earnings of $1.02 beat analysts' consensus estimates by 3 cents.
The results were aided by gains in loan growth coupled with steady expense management.
"Wachovia's quarter was very solid," said Anthony R. Davis, senior vice president of Dean Witter Reynolds Inc. "They are on the threshold of really beginning to distinguish themselves relative to other banks."
During the final three months of the year, average loans increased $2.61 billion, or 9.2%. Growth occurred primarily in commercial loans, commercial and residential mortgages, lease financing and credit cards, the bank said.
Wachovia took a hit in its credit card portfolio of nearly $40 million in net losses, up 54% from the fourth quarter of 1995.
But observers pointed out that the bank is managing the portfolio well, generating margins still about 150 basis points better than other banks.
Yearend earnings at the $45 billion-asset company were $644.6 million, up 7% from 1995's yearend.
Wachovia shares were down 50 cents Wednesday, to $56.375.
This article was written by Jacqueline S. Gold based on reporting by Chris Rhoads in San Francisco, Brett Chase in Chicago, John Kimelman in New York, and Carey Gillam in Atlanta. +++
Wachovia Corp.
Winston-Salem, N.C. Dollar amounts in millions (except per share) Fourth Quarter 4Q96 4Q95 Net income $170.7 $146.2 Per share 1.02 0.85 ROA 1.49% 1.35% ROE 18.60% 16.36% Net interest margin 4.11% 4.01% Net interest income 405.0 366.7 Noninterest income 206.3 188.8 Noninterest expense 322.7 315.1 Loss provision 47.4 30.2 Net chargeoffs 47.4 30.0 Year to Date 1996 1995 Net income $644.6 $602.5 Per share 3.80 3.49 ROA 1.43% 1.45% ROE 17.62% 17.67% Net interest margin 4.02% 4.16% Net interest income 1,554.7 1,440.6 Noninterest income 787.7 735.6 Noninterest expense 1,257.5 1,203.6 Loss provision 149.9 103.8 Net chargeoffs 149.6 101.1 Balance Sheet 12/31/96 12/31/95 Assets $46,905.0 $44,981.0 Deposits 27,250.0 26,369.0 Loans 31,283.0 29,261.0 Reserve/nonp. loans 681% 763% Nonperf. loans/loans 0.19% 0.18% Nonperf. assets/assets 0.17% 0.15% Nonperf. assets/loans + OREO 0.25% 0.24% Leverage cap. ratio 8.72% 8.36% Tier 1 cap. ratio 9.30%* 9.40% Tier 1+2 cap. ratio 13.40%* 13.60%
*Estimated
Republic New York Corp. New York Dollar amounts in millions (except per share) Fourth Quarter 4Q96 4Q95 Net income $108.5 $94.9 Per share 1.82 1.54 ROA 0.79% 0.79% ROE 14.87% 14.56% Net interest margin 2.45% 2.50% Net interest income 250.7 210.1 Noninterest income 119.9 97.0 Noninterest expense 207.2 169.2 Loss provision 4.0 3.0 Net chargeoffs 3.8 15.8 Year to Date 1996 1995 Net income $418.8 $288.6 Per share 6.97 4.59 ROA 0.80% 0.61% ROE 15.24% 11.73% Net interest margin 2.48% 2.61% Net interest income 962.2 818.9 Noninterest income 446.1 412.9 Noninterest expense 785.8 821.7 Loss provision 32.0 12.0 Net chargeoffs 25.0 31.3 Balance Sheet 12/31/96 12/31/95 Assets $52,299.0 $43,882.0 Deposits 31,726.0 24,920.0 Loans 11,722.0 9,844.0 Reserve/nonp. loans 333.4% 442.9% Nonperf. loans/loans 0.90% 0.69% Nonperf. assets/assets 0.17% 0.23% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 5.85%* 6.24% Tier 1 cap. ratio 14.05%* 14.72% Tier 1+2 cap. ratio 23.75%* 24.96%
*Estimated
PNC Bank Corp. Pittsburgh Dollar amounts in millions (except per share) Fourth Quarter 4Q96 4Q95 Net income $271.9 ($176.2) Per share 0.79 (0.52) ROA 1.56% (0.92)% ROE 18.58% (11.92%) Net interest margin 3.92% 3.22% Net interest income 625.6 563.8 Noninterest income 388.6 23.3 Noninterest expense 586.5 825.8 Loss provision 0.0 1.5 Net chargeoffs 57.0 55.0 Year to Date 1996 1995 Net income $992.2 $408.1 Per share 2.87 1.19 ROA 1.40% 0.54% ROE 17.18% 7.05
Net interest margin 3.83% 3.15% Net interest income 2,478.6 2,188.5 Noninterest income 1,395.1 960.4 Noninterest expense 2,311.9 2,469.3 Loss provision 00.0 6.0 Net chargeoffs 164.0 133.0 Balance Sheet 12/31/96 12/31/95 Assets $73,260.0 $73,404.0 Deposits 45,676.0 46,899.0 Loans 51,798.0 48,653.0 Reserve/nonp. loans 334.40% 351.68% Nonperf. loans/loans 0.67% 0.74% Nonperf. assets/assets 0.63% 0.73% Nonperf. assets/loans + OREO 0.88% 1.10% Leverage cap. ratio 7.24% 6.37% Tier 1 cap. ratio 8.40%* 8.00% Tier 1+2 cap. ratio 11.80%* 11.56%
*Estimated
Fleet Financial Group, Inc. Boston Dollar amounts in millions (except per share) Fourth Quarter 4Q96 4Q95 Net income $302.0 ($138.0) Per share 1.05 (1.17) ROA 1.40% 1.24% ROE 17.67% 15.45% Net interest margin 5.00% 4.00% Net interest income 910.0 747.0 Noninterest income 577.0 526.0 Noninterest expense 905.0 814.0 Loss provision 65.0 26.0 Net chargeoffs 124.0 95.0 Year to Date 1996 1995 Net income $1,139.0 $610.0 Per share 3.95 1.57 ROA 1.37% 1.26% ROE 17.43% 16.29% Net interest margin 4.81% 4.12% Net interest income 3,439.0 3,065.0 Noninterest income 2,201.0 1,855.0 Noninterest expense 3,460.0 3,075.0 Loss provision 213.0 101.0 Net chargeoffs 370.0 302.0 Balance Sheet 12/31/96 12/31/95 Assets $85,518.0 $84,432.0 Deposits 67,071.0 57,122.0 Loans 58,844.0 51,525.0 Reserve/nonp. loans 213.79% 300.23% Nonperf. loans/loans 1.18% 0.85% Nonperf. assets/assets 0.85% 0.59% Nonperf. assets/loans + OREO 1.23% 0.97% Leverage cap. ratio 7.16% 6.40% Tier 1 cap. ratio 7.64% 7.61% Tier 1+2 cap. ratio 11.32% 11.29%
First Chicago NBD Corp. Chicago Dollar amounts in millions (except per share) Fourth Quarter 4Q96 4Q95 Net income $377.0 $126.0 Per share 1.14 0.37 ROA 1.46% 1.02% ROE 17.50% 15.40% Net interest margin 4.11% 3.23% Net interest income 907.0 864.0 Noninterest income 682.0 655.0 Noninterest expense 813.0 821.0 Loss provision 190.0 210.0 Net chargeoffs 190.0 107.0 Year to Date 1996 1995 Net income $1,436.0 $1,150.0 Per share 4.32 3.41 ROA 1.28% 1.10% ROE 17.00% 16.80% Net interest margin 3.83% 3.14% Net interest income 3,722.0 3,311.0 Noninterest income 2,548.0 2,591.0 Noninterest expense 3,271.0 3,268.0 Loss provision 735.0 510.0 Net chargeoffs 670.0 264.0 Balance Sheet 12/31/96 12/31/95 Assets $104,619.0 $122,002.0 Deposits 63,669.0 69,106.0 Loans 65,007.0 63,096.0 Reserve/nonp. loans 537% 369% Nonperf. loans/loans 0.40% 0.60% Nonperf. assets/assets 0.30% 0.30% Nonperf. assets/loans + OREO 0.40% 0.60% Leverage cap. ratio 9.30% 6.90% Tier 1 cap. ratio 9.10% 7.80% Tier 1+2 cap. ratio 13.20% 11.80%
Bank of America Corp. San Francisco Dollar amounts in millions (except per share) Fourth Quarter 4Q96 4Q95 Net income $747.0 $704.0 Per share 1.93 1.74 ROA 1.21% 1.20% ROE 15.24% 14.96% Net interest margin 4.13% 4.44% Net interest income 2,130.0 2,137.0 Noninterest income 1,499.0 1,158.0 Noninterest expense 2,250.0 1,966.0 Loss provision 220.0 130.0 Net chargeoffs 207.0 231.0 Year to Date 1996 1995 Net income $2,873.0 $2,664.0 Per share 7.31 6.49 ROA 1.19% 1.17% ROE 15.00% 14.58% Net interest margin 4.23% 4.51% Net interest income 8,587.0 8,462.0 Noninterest income 5,412.0 4,546.0 Noninterest expense 8,341.0 8,001.0 Loss provision 885.0 440.0 Net chargeoffs 918.0 589.0 Balance Sheet 12/31/96 12/31/95 Assets $250,753.0 $232,446.0 Deposits 168,015.0 160,494.0 Loans 165,415.0 155,373.0 Reserve/nonp. loans 248.98% 177.61% Nonperf. loans/loans 0.86% 1.29% Nonperf. assets/assets 0.57% 0.86% Nonperf. assets/loans + OREO 0.86% 1.28% Leverage cap. ratio 7.45% 6.92% Tier 1 cap. ratio 7.72% 7.35% Tier 1+2 cap. ratio NA 11.40% ===
