Bank of N.Y. Profits Jump 10%; Securities Processing Fees Cited

Bank of New York Co. said its profits rose 10%, to $295 million, in the second quarter on robust fee growth, particularly in securities processing.

The per-share earnings 75 cents were in line with Wall Street forecasts.

The $63 billion-asset company posted an annualized return on equity of 24.03% as internal growth and a string of acquisitions boosted its processing businesses.

The strong report covered a period of unusual activity at Bank of New York. In May it abandoned a month-long battle to force a merger with Mellon Bank Corp., Pittsburgh.

The high-profile fight apparently did not distract Bank of New York from its primary businesses, analysts said.

"Management went out of its way to make sure it was business as usual," said Diane Glossman, an analyst at Lehman Brothers.

Bank of New York said fee revenues made up 58% of its total, up from 53% a year earlier. Over all, revenues grew 6%, to $964 million.

"Fee income is making up for margin compression and much slower net interest income growth," said Bradley Ball, an analyst at Credit Suisse First Boston. "That trend is much more visible at the processing banks."

Bank of New York has been building its custody, trust, and other securities services for institutions and corporations since the early 1990s, viewing the business as a steady source of revenues.

The bank's securities servicing revenues shot up 25%, to $239 million. Without acquisitions, those revenues would have been up 16%.

"We can be confident that they aren't just getting revenue growth by acquisition," Ms. Glossman said.

Other securities-related businesses also posted strong quarterly results. Fees from cash processing, including funds transfer and cash management, grew 8%, to $64 million. Trust and investment fees rose 16%, to $51 million, while foreign exchange revenues increased 69%, to $42 million.

Net interest income dipped 13%, to $424 million, partly due to the sale in November of Bank of New York's credit card portfolio to Chase Manhattan Corp. The net interest margin contracted to 3.28%, from 4.08%

Expenses rose 2%, to $472 million, including $8 million for computer upgrades to address year-2000 concerns.

The New York bank also said it has moved it headquarters from its historic location at 48 Wall St. to the old Irving Trust Co. tower at 1 Wall St. Bank of New York acquired Irving Bank Corp. in 1990.

Also on Monday, Northern Trust Corp. of Chicago said net income rose 16%, to $87.2 million. Earnings per share of 75 cents met analysts' estimates.

The $29.8 billion-asset company said noninterest income, mostly trust fees, grew 19%, to $266 million. Trust income grew 20%, to $202 million, while net interest income rose 9%, to $128 million.

Northern Trust said it completed its $15 million acquisition of Trust Bank of Colorado during the quarter. The deal brought the bank into the Denver market and reflects its strategy to build revenues from personal finance services, the bank said. +++

Bank of New York Co.

New York

Dollar amounts in millions (except per share)

Second Quarter 2Q98 2Q97

Net income $295.0 $269.0

Per share 0.75 0.66

ROA 1.90% 1.83%

ROE 24.03% 21.84%

Net interest margin 3.28% 4.08%

Net interest income 424.0 489.0

Noninterest income 561.0 489.0

Noninterest expense 472.0 465.0

Loss provision 5.0 60.0

Net chargeoffs 4.0 97.0

Year to Date 1998 1997

Net income $578.0 $534.0

Per share 1.48 1.29

ROA 1.91% 1.84%

ROE 24.49% 21.36%

Net interest margin 3.30% 4.16%

Net interest income 828.0 985.0

Noninterest income 1,113.0 944.0

Noninterest expense 939.0 909.0

Loss provision 10.0 120.0

Net chargeoffs 9.0 189.0

Balance Sheet 6/30/98 6/30/97

Assets $62,974.0 $61,242.0

Deposits 43,408.0 43,813.0

Loans 39,049.0 39,024.0

Reserve/nonp. loans 356.10% 347.40%

Nonperf. loans/loans 0.50% 0.60%

Nonperf. assets/assets 0.30% 0.40%

Nonperf. assets/loans + OREO 0.50% 0.60%

Leverage cap. ratio 7.17% 8.04%

Tier 1 cap. ratio 7.27% 7.83%

Tier 1+2 cap. ratio 11.28% 12.00% ===