Steep gains from trading operations and tighter credit controls helped banks, including the nation's largest, post some record third-quarter results Tuesday.
Profits were up 14% at Chase Manhattan Corp., the country's biggest bank, to $982 million. Chairman and chief executive officer Walter V. Shipley credited across-the-board revenue gains and continuing benefits from last year's merger with Chemical Banking Corp. for the impressive showing.
The results validate "the power of our franchise across both wholesale and consumer businesses," he said.
With earnings momentum from its credit card business, Columbus, Ohio- based Banc One Corp. reported a 5% jump in net income to $433 million.
Meanwhile, San Francisco-based Wells Fargo & Co. actually realized a 10% decline in earnings to $290 million, but managed to exceed earnings estimates by 5 cents per share. Chairman and chief executive officer Paul Hazen said Wells may have finally stanched the losses of deposits and loans associated with its 1996 acquisition of First Interstate Bancorp.
At Bank of New York Co., profits were up 10%, to $273 million spurred by a sharp gain in the company's securities processing businesses.
Chase Manhattan Corp.
On a per-share basis, profits at $366.6 billion-asset Chase reached $2.16, and met consensus estimates.
The performance impressed Wall Street. "It's almost like a fantasy," said George Salem, an analyst with Gerard Klauer Mattison, New York. "Everything fell together as well as it could for them."
Revenue rose 15%, propelled by double digit growth in asset management, private banking services and related areas. Trading and investment management showed gains and also demonstrated "the securities expertise Chase has been amassing," Mr. Salem said.
Chase said total trading revenues were $678 million. Foreign exchange, emerging markets, and derivatives activities were particularly strong, the bank said.
Credit card delinquencies were down, with chargeoffs falling to 5.57% from their peak of 5.99% in the second quarter. Commercial banks like Chase benefited in the third quarter from tighter credit policies they began setting a year ago, analysts said.
Chase expects to boost its credit card business further through the planned purchase of the credit card portfolio of the Bank of New York. (See story on page 1.)
Banc One Corp.
Banc One Corp. said income rose due to strong loan and fee income growth, both products of the company's huge credit card operation. The $113.1 billion-asset company met analysts' earnings estimates of 73 cents per share.
Noninterest income rose 32% from the prior year to $1.1 billion, while net interest income increased 7% to $1.4 billion.
Credit card servicing income rose 71% to $468 million largely as a result of Banc One's second-quarter acquisition of First USA Inc. A more than doubling of its marketing expenses led to a 22% increase in noninterest expense, which was $1.5 billion in the quarter.
The company's credit cards led to strong loan growth. Managed credit cards totaled $37.6 billion in the quarter, up 27% from the second quarter. The net chargeoff ratio decreased to 5.78% in the third quarter, compared with 6.22% in the second quarter.
"I think you can say the worst of the credit card cycle for Banc One is over," said Anthony Davis, an analyst with SBC Warburg Dillon Read. At the same time, Mr. Davis pointed out Banc One is aggressively pursuing credit card accounts. It added 2.3 million credit card customers in the second quarter, and Mr. Davis said the company is "spending like crazy" on marketing to get new business. That the company can lower its losses and add new business is encouraging, Mr. Davis said.
Wells Fargo & Co.
Wells Fargo, with $97.7 billion of assets, said its income was down largely because of a decline in earning assets and a large increase in the company's loan loss provision. Earnings per share were $3.26.
Wells continues to reel from the loss of deposits from former First Interstate customers. In addition, the company is selling deposits. It sold 83 branches and $1 billion of deposits in the last quarter.
"We are encouraged by the business trends we have seen this quarter and the upturn in loan volumes that occurred at the end of the quarter," said Mr. Hazen. "Both loans and checking deposits bottomed out in August and grew in September," Mr. Hazen said.
"I was encouraged by those comments," said Joseph Morford, an analyst with BT Alex. Brown. "They indicate the business is beginning to stabilize. They may have reached the bottom."
Net interest income declined 13% from a year ago to $1.1 billion, while noninterest income rose 5% to $677 million.
Noninterest expense declined 17% from a year ago to $1.1 billion largely due to cost savings from the First Interstate deal.
Wells said it increased its loan-loss provision by $140 million in the third quarter and this contributed to the decline in net income. Wells has a loan-loss provision of $175 million and the company indicated that provision would increase another $30 million to $40 million in the fourth quarter. Net chargeoffs, although higher than a year ago, declined 5% from the second quarter.
R. Jay Tejera, an analyst with Dain Bosworth Inc., said he believes Wells will continue to lose customers through the end of the year. The company lost $2 billion of deposits in the third quarter and has lost $13.8 billion of deposits since January 1996. Mr. Tejera said he expects the company to lose a total of 20% of deposits as a result of the First Interstate deal. He believes, however, the company is on track for further expense reductions.
Bank of New York Co.
Earnings per share of 69 cents-a record for Bank of New York-met analysts' estimates.
Net interest income rose to $495 million, from $476 million in the third quarter of last year.
The $61.4 billion-asset bank boosted its average common equity to a record 22.06%, helped by its securities processing businesses.
"The environment was terrific" for those lines of business, said Diane Glossman, an analyst with Salomon Brothers, New York.
"All market related revenue categories were strong" in the third quarter.
Bank of New York said corporate trust, government securities clearance, mutual funds and stock transfer did particularly well.
Fees from other processing businesses, including funds transfer, cash management and trade finance, grew 15%, benefiting from new business and solid markets, the bank said. +++
Bank of New York Corp. New York Dollar amounts in millions (except per share) Third Quarter 3Q97 3Q96 Net income $273.0 $249.0 Per share 0.69 0.60 ROA 1.81% 1.92% ROE 22.06% 19.63% Net interest margin 4.02% 4.28% Net interest income 495.0 476.0 Noninterest income 504.0 432.0 Noninterest expense 473.0 455.0 Loss provision 60.0 40.0 Net chargeoffs 121.0 65.0 Year to Date 1997 1996 Net income $806.0 $739.0 Per share 2.00 1.74 ROA 1.83% 1.92% ROE 21.59% 20.14% Net interest margin 4.11% 4.35% Net interest income 1,480.0 1,499.0
Noninterest income 1,448.0 1,689.0
Noninterest expense 1,384.0 1,355.0 Loss provision 180.0 555.0 Net chargeoffs 311.0 354.0 Balance Sheet 9/30/97 9/30/96 Assets $61,429.0 $52,388.0 Deposits 42,470.0 36,560.0 Loans 38,388.0 36,030.0 Reserve/nonp. loans 376.8% 488.3% Nonperf. loans/loans 0.60% 0.70% Nonperf. assets/assets 0.40% 0.50% Nonperf. assets/loans + OREO 0.60% 0.70% Leverage cap. ratio 7.81% 8.17% Tier 1 cap. ratio 7.54% 7.66% Tier 1+2 cap. ratio 11.52% 12.26%
Chase Manhattan Corp. New York Dollar amounts in millions (except per share) Third Quarter 3Q97 3Q96 Net income $982.0 $858.0 Per share 2.16 1.78 ROA 1.08% 1.06% ROE 18.55% 16.65% Net interest margin 2.81% 3.07% Net interest income 2,046.0 2,026.0 Noninterest income 2,363.0 1,899.0 Noninterest expense 2,661.0 2,320.0 Loss provision 190.0 220.0 Net chargeoffs 190.0 220.0 Year to Date 1997 1996 Net income $2,834.0 $1,625.0 Per share 6.08 3.23 ROA 1.08% 0.68% ROE 18.08% 10.63% Net interest margin 2.90% 3.21% Net interest income 6,079.0 6,181.0 Noninterest income 6,620.0 5,733.0 Noninterest expense 7,579.0 8,737.0 Loss provision 599.0 715.0 Net chargeoffs 599.0 817.0 Balance Sheet 9/30/97 9/30/96 Assets $366,574.0 $322,604.0 Deposits 181,788.0 165,042.0 Loans 163,087.0 150,333.0 Reserve/nonp. loans 372% 270% Nonperf. loans/loans 0.57% 0.91% Nonperf. assets/assets 0.28% 0.47% Nonperf. assets/loans + OREO 0.63% 1.01% Leverage cap. ratio 6.10%* 7.00% Tier 1 cap. ratio 7.80%* 8.40% Tier 1+2 cap. ratio 11.60%* 12.20% *Estimated
Banc One Corp. Columbus, Ohio Dollar amounts in millions (except per share) Third Quarter 3Q97 3Q96 Net income $433.2 $412.8 Per share 0.73 0.69 ROA 1.51% 1.58% ROE 17.46% 17.23% Net interest margin 5.37% 5.43% Net interest income 1,363.3 1,276.4 Noninterest income 1,102.9 837.8 Noninterest expense 1,535.3 1,257.0 Loss provision 270.8 240.3 Net chargeoffs 289.4 209.5 Year to Date 1997 1996 Net income $830.9 $1,230.8 Per share 1.40 2.04 ROA 0.99% 1.58% ROE 11.31% 17.33% Net interest margin 5.44% 5.43% Net interest income 4,073.5 3,792.9
Noninterest income 2,740.6 2,366.5 Noninterest expense 4,568.5 3,687.0 Loss provision 938.5 623.1 Net chargeoffs 830.5 559.9 Balance Sheet 9/30/97 9/30/96 Assets $113,127.0 $107,262.8 Deposits 75,782.2 73,170.0 Loans 81,397.4 75,452.8 Reserve/nonp. loans 314.0% 271.7% Nonperf. loans/loans 0.52% 0.54% Nonperf. assets/assets 0.43% 0.45% Nonperf. assets/loans + OREO 0.59% 0.62% Leverage cap. ratio 7.59%* 8.52% Tier 1 cap. ratio 8.50%* 9.63% Tier 1+2 cap. ratio 13.75%* 13.32%
*Estimated
Wells Fargo & Co. San Francisco Dollar amounts in millions (except per share) Third Quarter 3Q97 3Q96 Net income $290.0 $321.0 Per share 3.26 3.23 ROA 1.18% 1.18% ROE 8.94% 8.64% Net interest margin 5.94% 6.15% Net interest income 1,132.0 1,299.0 Noninterest income 677.0 643.0 Noninterest expense 1,087.0 1,305.0 Loss provision 175.0 35.0 Net chargeoffs 202.0 171.0 Year to Date 1997 1996 Net income $857.0 $948.0 Per share 9.38 11.42 ROA 1.14% 1.43% ROE 8.62% 11.36% Net interest margin 6.00% 6.11% Net interest income 3,497.0 3,278.0 Noninterest income 1,996.0 1,636.0 Noninterest expense 3,450.0 3,149.0 Loss provision 420.0 35.0 Net chargeoffs 615.0 462.0 Balance Sheet 9/30/97 9/30/96 Assets $97,655.0 $109,176.0 Deposits 70,922.0 83,737.0 Loans 65,104.0 69,233.0 Reserve/nonp. loans 317.6% 293.5% Nonperf. loans/loans 0.90% 1.10% Nonperf. assets/assets 0.80% 0.90% Nonperf. assets/loans + OREO 1.20% 1.40% Leverage cap. ratio 6.75% 6.12% Tier 1 cap. ratio 7.50% 7.04% Tier 1+2 cap. ratio 11.45% 11.05% ===
