The economic turmoil in Asia took a clear toll on the fourth-quarter earnings of the top three U.S. banks.
J.P. Morgan, the nation's third-largest banking company, reported Tuesday that its net income plunged 35% from the year-earlier period, to $271 million. Per-share earnings of $1.33 were 27 cents below analyst consensus targets.
Chase Manhattan Corp., the largest U.S. banking company, and Citicorp, the second largest, eked out increases of 5% and 7%, respectively. But all three companies said results were dampened by the conditions in Asia.
"It was anything but a normal quarter," said John S. Reed, chairman of Citicorp.
Analysts were prepared for bad news Tuesday, because the banks had issued warnings. But some expressed concern over the extent of the impact on Morgan.
"It's the first we've seen of this magnitude," said Diane B. Glossman, an analyst at Lehman Brothers. It hearkens back to the days when bank profits suffered from loans made to developing countries, she added.
Ms. Glossman pointed out, though, that most of the banks, including Chase and Citicorp, were able to "earn through" trading losses with gains in core businesses. "We'll have to stay tuned," she said.
Chase posted earnings of $874 million, or $1.94 per share-3 cents ahead of analysts' consensus. Citicorp earned $1.06 billion for the period, or $2.20 a share. That beat the consensus by 1 cent.
Other regional banks, by contrast, posted double-digit gains.
Bank of New York Co. said profits rose 19%, to $298 million, fueled by a $177 million gain on the sale of its remaining credit card portfolio to Chase and by growth in revenues from securities processing, foreign exchange, and asset management. Earnings per share of 75 cents beat the consensus by 2 cents.
Meanwhile, BankBoston Corp. is moving to take advantage of the trouble in Asia. It has decided to expand its capital markets operations there, prompting the departure of its senior executive in the region. (See story on page 3.)
Chase Manhattan Corp.
Chase, with $376 billion of assets, cited substantial gains in its core businesses.
Consumer banking revenues were up 12% to $1.9 billion, with particular help from credit cards and mortgage servicing fees.
Corporate finance revenues doubled, to $335 million, and venture capital revenue grew 19%, to $207 million. Foreign exchange revenues doubled, to $231 million.
But Chase suffered a 72% decline in trading revenues during the quarter, to $127 million. The biggest culprit was trading in emerging markets debt, which caused a loss of $271 million.
For the full-year 1997, Chase's profits surged 48%, to $3.7 billion. However, 1996 results reflected restructuring charges from the bank's merger with Chemical Banking Corp.
Revenues for the full-year were up 8% to $17.7 billion.
Despite the gain in credit card revenues, net chargeoffs in the portfolio grew to 5.45%, from 5.11% in the same period last year.
Expenses rose 14% in the quarter, to $793 million.
Citicorp
The $311 billion-asset company said Asian turmoil reduced pretax profits by $250 million, including $90 million in trading losses.
However these difficulties were offset by gains in foreign exchange. Foreign exchange revenue shot up 98%, to $443 million.
Trading revenue declined 36% in the quarter to $347 million. Revenue from trading in emerging markets debt dropped 50%, to $86 million.
Citicorp's global consumer bank suffered losses in branch banking and credit cards, both at home and abroad. Revenues from consumer banking fell 1%, to $3.5 billion, and profits fell 20% to $456 million.
Much of that loss was in credit cards, which suffered a 4% decline in revenue, to $1.7 billion, and a 26% decline in profits, to $209 million. The bank said most of the drop came from the emerging markets card business.
Domestically, card chargeoffs as a percentage of total managed assets reached 5.64%, up from 5.45% a year earlier.
Analysts said they expect profits from cards to improve this year as Citicorp renews its efforts to grow accounts. "They're a big battleship," said George Bicher, an analyst at BT Alex. Brown. "You can't expect them to turn on a dime."
For the year, Citicorp's profits declined 5%, to $3.6 billion, mostly due to an $889 million restructuring charge in the third quarter. Yearend earnings per share of $7.33 fell $1.16 short of analysts' estimates.
Revenues increased 5% for the quarter, to $6 billion, 8% for the year, to $23.3 billion. +++
Bank of New York Co. New York Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $298.0 $250.0 Per share 0.75 0.60 ROA 1.95% 1.84% ROE 23.73% 19.48% Net interest margin 3.26% 4.33% Net interest income 409.0 500.0 Noninterest income 689.0 441.0 Noninterest expense 491.0 480.0 Loss provision 100.0 45.0 Net chargeoffs 44.0 101.0 Year to Date 1997 1996 Net income $1,104.0 $1,020.0 Per share 2.71 2.40 ROA 1.86% 1.90% ROE 22.13% 19.98% Net interest margin 3.89% 4.35% Net interest income 1,890.0 1,999.0 Noninterest income 2,137.0 2,130.0 Noninterest expense 1,874.0 1,835.0 Loss provision 280.0 600.0 Net chargeoffs 354.0 455.0 Balance Sheet 12/31/97 12/31/96 Assets $59,953.0 $55,765.0 Deposits 41,357.0 39,343.0 Loans 34,486.0 36,105.0 Reserve/nonp. loans 3.32% 4.42% Nonperf. loans/loans 0.60% 0.60% Nonperf. assets/assets 0.30% 0.40% Nonperf. assets/loans + OREO 0.60% 0.60% Leverage cap. ratio 7.61% 8.70% Tier 1 cap. ratio 7.89% 8.34% Tier 1+2 cap. ratio 11.92% 12.78%
Chase Manhattan Corp. New York Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $874.0 $836.0 Per share 1.94 1.74 ROA 0.92% 1.00% ROE 17.02% 16.73% Net interest margin 2.73% 3.04% Net interest income 2,079.0 2,041.0 Noninterest income 2,005.0 1,897.0 Noninterest expense 2,490.0 2,407.0 Loss provision 205.0 182.0 Net chargeoffs 205.0 182.0 Year to Date 1997 1996 Net income $3,708.0 $2,461.0 Per share 8.03 4.94 ROA 1.04% 0.77% ROE 18.73% 12.48% Net interest margin 2.86% 3.16% Net interest income 8,158.0 8,222.0 Noninterest income 8,625.0 7,630.0 Noninterest expense 10,069.0 11,144.0 Loss provision 804.0 897.0 Net chargeoffs 804.0 999.0 Balance Sheet 12/31/97 12/31/96 Assets $365,521.0 $336,099.0 Deposits 193,688.0 180,921.0 Loans 164,830.0 151,543.0 Reserve/nonp. loans 399.12% 347.60% Nonperf. loans/loans 0.54% 0.66% Nonperf. assets/assets 0.28% 0.34% Nonperf. assets/loans + OREO 0.60% 0.74% Leverage cap. ratio 6.00% 6.80% Tier 1 cap. ratio 7.90%* 8.20% Tier 1+2 cap. ratio 11.70%* 11.80%
* Estimated
Comerica Inc. Detroit, Mich. Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $140.0 $61.0 Per share 0.85 0.35 ROA 1.57% 0.72% ROE 21.68% 9.42% Net interest margin 4.48% 4.61% Net interest income 366.0 353.0 Noninterest income 141.0 132.0 Noninterest expense 257.0 356.0 Loss provision 37.0 32.0 Net chargeoffs 25.0 22.0 Year to Date 1997 1996 Net income $530.0 $417.0 Per share 3.19 2.38 ROA 1.52% 1.22% ROE 21.32% 15.98% Net interest margin 4.53% 4.54% Net interest income 1,443.0 1,412.0 Noninterest income 528.0 507.0 Noninterest expense 1,008.0 1,159.0 Loss provision 146.0 114.0 Net chargeoffs 89.0 85.0 Balance Sheet 12/31/97 12/31/96 Assets $36,292.0 $34,206.0 Deposits 22,586.0 22,367.0 Loans 28,895.0 26,207.0 Reserve/nonp. loans 494.68% 329.88% Nonperf. loans/loans 0.30% 0.42% Nonperf. assets/assets 0.28% 0.41% Nonperf. assets/loans + OREO 0.36% 0.53% Leverage cap. ratio 7.09% 7.07% Tier 1 cap. ratio 7.07% 7.18% Tier 1+2 cap. ratio 11.14% 10.99%
J.P. Morgan & Co. New York Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $271.0 $419.0 Per share 1.33 2.04 ROA 0.40% 0.71% ROE 9.70% 15.30% Net interest margin 0.89% 1.08%
Net interest income 455.0 484.0 Noninterest income 1,225.0 1,321.0 Noninterest expense 1,308.0 1.197.0 Loss provision 0.0 0.0 Net chargeoffs (15.0) 3.0 Year to Date 1997 1996 Net income $1,465.0 $1,574.0 Per share 7.17 7.63 ROA 0.58% 0.73% ROE 13.40% 14.90% Net interest margin 0.98% 1.04% Net interest income 1,872.0 1,702.0 Noninterest income 5,348.0 5,153.0 Noninterest expense 5,066.0 4,523.0 Loss provision 0.0 0.0 Net chargeoffs (35.0) (14.0) Balance Sheet 12/31/97 12/31/96 Assets $262,159.0 $222,026.0 Deposits 58,879.0 52,724.0 Loans 31,032.0 27,554.0 Reserve/nonp. loans 483.2% 471.7% Nonperf. loans/loans 0.36% 0.43% Nonperf. assets/assets 0.25% 0.05% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 7.90% NA Tier 1 cap. ratio 11.90% NA Tier 1+2 cap. ratio 4.40% NA
Banc One Corp. Columbus, Ohio Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $474.8 $433.2 Per share 0.79 0.73 ROA 1.67% 1.51% ROE 18.76% 17.46% Net interest margin 5.33% 5.52% Net interest income 1,318.8 1,345.7 Noninterest income 1,095.3 996.4 Noninterest expense 1,480.3 1,375.0 Loss provision 272.6 270.8 Net chargeoffs 290.3 259.7 Year to Date 1997 1996 Net income $1,305.7 $1,672.8 Per share 2.19 2.77 ROA 1.16% 1.59% ROE 13.22% 17.56% Net interest margin 5.41% 5.45% Net interest income 5,392.3 5,138.6 Noninterest income 3,835.9 3,362.9 Noninterest expense 6,048.8 5,062.0 Loss provision 1,211.1 942.7 Net chargeoffs 1,120.8 819.6 Balance Sheet 12/31/97 12/31/96 Assets $115,901.3 $112,153.5 Deposits 77,414.3 74,223.0 Loans 82,052.8 79,389.7 Reserve/nonp. loans 324% 313% Nonperf. loans/loans 0.49% 0.47% Nonperf. assets/assets 0.41% 0.39% Nonperf. assets/loans + OREO 0.56% 0.54% Leverage cap. ratio 7.91% 8.88% Tier 1 cap. ratio 8.50% 9.98% Tier 1+2 cap. ratio 13.11% 14.07%
Wachovia Corp. Winston-Salem, N.C. Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $3.6 $201.5 Per share 0.02 0.98 ROA 0.02% 1.44% ROE 0.30% 17.94% Net interest margin 4.21% 4.08% Net interest income 555.5 500.9 Noninterest income 261.6 1,007.2 Noninterest expense 732.4 1,966.7 Loss provision 76.9 59.3 Net chargeoffs 76.2 59.3 Year to Date 1997 1996 Net income $592.8 $757.3 Per share 2.94 3.65 ROA 1.03% 1.36% ROE 13.08% 16.99% Net interest margin 4.16% 4.01% Net interest income 2,093.6 1,923.7 Noninterest income 1,007.2 879.3 Noninterest expense 1,966.7 1,509.0 Loss provision 264.9 193.8 Net chargeoffs 264.2 193.5 Balance Sheet 12/31/97 12/31/96 Assets $65,397.0 $57,229.0 Deposits 42,654.0 35,322.0 Loans 44,194.0 38,007.0 Reserve/nonp. loans 575% 526% Nonperf. loans/loans 0.21% 0.26% Nonperf. assets/assets 0.19% 0.23% Nonperf. assets/loans + OREO 0.28% 0.35% Leverage cap. ratio NA NA Tier 1 cap. ratio 9.00%* 9.50% Tier 1+2 cap. ratio 11.90%* 13.00% * Estimated
Wells Fargo & Co. San Francisco Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $298.0 $123.0 Per share 3.40 1.12 ROA 1.23% 0.45% ROE 9.29% 2.99% Net interest margin 5.94% 6.14% Net interest income 1,130.0 1,253.0 Noninterest income 708.0 564.0 Noninterest expense 1,098.0 1,488.0 Loss provision 195.0 70.0 Net chargeoffs 190.0 178.0 Year to Date 1997 1996 Net income $1,155.0 $1,071.0 Per share 12.77 12.21 ROA 1.16% 1.15% ROE 8.79% 8.83% Net interest margin 5.99% 6.11% Net interest income 4,627.0 4,532.0 Noninterest income 2,704.0 2,200.0 Noninterest expense 4,549.0 4,637.0 Loss provision 615.0 105.0 Net chargeoffs 805.0 640.0 Balance Sheet 12/31/97 12/31/96 Assets $97,456.0 $108,888.0 Deposits 72,199.0 81,821.0 Loans 65,734.0 67,389.0 Reserve/nonp. loans 340.40% 278.70% Nonperf. loans/loans 0.80% 1.10% Nonperf. assets/assets 0.70% 0.90% Nonperf. assets/loans + OREO 1.10% 1.40% Leverage cap. ratio 7.00% 6.70% Tier 1 cap. ratio 7.60% 7.70% Tier 1+2 cap. ratio 11.50% 11.70%
Citicorp New York Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $1,061.0 $987.0 Per share 2.20 1.97 ROA 1.39% 1.42% ROCE 21.50% 20.60% Net interest margin 4.85% 5.28% Net interest income 3,467.3,484.0 Noninterest income 2,709.0 2,547.0 Noninterest expense 3,408.0 3,281.0 Loss provision 486.0 504.0 Net chargeoffs 461.0 454.0 Year to Date 1997 1996 Net income $3,591.0 $3,788.0 Per share 7.33 7.43 ROA 1.22% 1.40% ROCE 18.10% 20.40% Net interest margin NA NA Net interest income 13,823.0 13,428.0
Noninterest income 10,214.0 9,256.0 Noninterest expense 13,987.0 12,197.0 Loss provision 1,907.0 1,926.0 Net chargeoffs 1,807.0 1,726.0 Balance Sheet 12/31/97 12/31/96 Assets $310,897.0 $281,018.0 Deposits 199,121.0 184,955.0 Loans 184,013.0 174,612.0 Reserve/nonp. loans 199.70% 178.00% Nonperf. loans/loans 1.60% 1.80% Nonperf. assets/assets 1.20% 1.50% Nonperf. assets/loans + OREO 2.00% 2.50% Leverage cap. ratio NA 7.40% Tier 1 cap. ratio 8.30%* 8.40% Tier 1+2 cap. ratio 12.30%* 12.20%
* Estimated ===
