PNC, Unionbancal, Zions Score Double-Digit Gains

PNC Bank Corp. said Thursday that earnings rose 21% in the first quarter, to $325 million, helpd by gains in several consumer-oriented businesses.

Excluding special items, earnings jumped 9%.

Profits per share, excluding the extraordinary events, were 94 cents, a penny better than analysts' estimates.

Pittsburgh-based PNC, with $74.9 billion of assets, said it benefited from higher revenues in its asset management, mutual fund servicing, consumer banking, and mortgage banking businesses.

Noninterest income was up 44% to $731 million, including $290 million of gains on the sale of its credit card business to MBNA Corp. and its part in teller machine network Electronic Payment Services.

PNC also recorded "valuation adjustments" of $142 million related to the bank's exit from some parts of the large corporate lending business.

The company said it would get out of the large corporate banking business in areas outside of its markets in Pennsylvania, Delaware, Kentucky, New Jersey, and Ohio.

PNC is also ending its involvement in the national health care lending business. Loans made in this area are to be sold off over the next two years, the company said. The move is part of a strategy to "exit capital- intensive, lower-return segments of its lending business and reduce reliance on spread income."

Excluding the extraordinary items, noninterest income rose 15%.

Asset management fees were up 14% to $161 million as a result of new business over the past year. Assets under management increased 22% to $182 billion. Mutual fund servicing fees grew 24% to $51 million.

Consumer service revenue, which includes brokerage and insurance, was up 59% to $130 million. The company attributed the increase to the addition of brokerage accounts from the acquisition of Hilliard Lyons of Louisville, Ky.

Net interest income rose 3% to $664 million.

"It's further progress toward rationalization of operations, and pruning out those operations where they aren't getting the returns they like," said James Schutz, an analyst with ABN Amro Inc.

PNC, the nation's 13th-largest banking company, closed Thursday's trading up 31 cents to $59.75.

Unionbancal Corp.

The holding company of San Francisco-based Union Bank of California reported first-quarter net income of $119 million Thursday, a 24% increase from the year-earlier period.

Unionbancal credited a 20% leap in fees reaped from deposit accounts for its 9% gain in noninterest income to $139 million.

Trust and investment management fees climbed 15%, to $4 million, due to an influx of managed assets.

The $32.3 billion-asset company, which is 64% owned by the Bank of Tokyo-Mitsubishi, beat analysts' per-share consensus estimate of 64 cents by a penny.

Net interest income showed strong gains compared to the year-earlier period, increasing 7% to $341 million. The banking company attributed that growth to an 8% climb in loan growth, to $2 billion. Average commercial, financial, and industrial loans grew 22%, to $13.3 billion. The gain helped counter a decline in the levels of consumer loans and residential mortgages, which dropped 17% and 12%, respectively.

Unionbancal also benefited from a $6.3 million federal income tax gain during the quarter.

Shares in Unionbancal, the nation's 29th-largest banking company, closed Thursday's trading up 69 cents to $34.36.

Harris Bank

Chicago-based Harris, a unit of Bank of Montreal, said its net income grew 8% to $54.5 million. Excluding gains on the sale of a credit card portfolio in last year's first quarter and one-time writeoffs on operations, income improved 15%.

At the end of the quarter, Harris' assets reached $25.3 million, its deposits were $17 million, and its loans were $13.7 million.

Zions Bancorp

First-quarter net income at Salt Lake City-based Zions climbed 25% to $49 million.

Zions, which reported late Wednesday, said net interest income rose 42% to $167 million.

However, analysts said a spate of recent acquisitions by the $17.1 billion-asset banking company masked a somewhat flat earnings trend during the quarter.

Because most of Zions' recent bank deals were accounted for as cash purchases, the company is not required to restate past earnings, said Joseph K. Morford of First Security Van Kasper, San Francisco. Therefore, the addition of earning assets and loan balances from the purchases of Sumitomo Bank of California and several smaller banks created unnaturally large income jumps.

"It was a very noisy quarter, but underneath it the sluggishness in revenues was a bit disappointing," Mr. Morford said. "Operating revenues looked rather flat on a quarter-to-quarter basis."

The banking company did meet analysts' consensus estimates of 62 cents per share.

Shares in Zions, which ranks 47th among banking companies, closed Thursday's trading at $69.50, down $6.36.

Pacific Century Financial Corp.

The parent company of Bank of Hawaii and Los Angeles-based Pacific Century Bank said late Wednesday that its net income climbed 4%, to $35 million.

Pacific Century, which has $14.9 billion of assets, credited a 20% boost in noninterest income to $59 million for the gain.

Deposit account service charges grew 14% to $9 million.

Trust income at the Honolulu-based company increased 12% to $16 million. Service charges and other fees were up 16% to $22 million.

"The good news is that they came in with increases in various noninterest income categories," said Diane B. Glossman, an analyst with Lehman Brothers Inc. "You have to give them good marks for their efforts to date."

The banking company, which ranks 50th in the country in terms of asset size, beat analysts' per share consensus estimate of 43 cents by a penny. However, it was obvious that Pacific Century was still operating under the burden of an eight-year slump in the Hawaiian economy.

At the end of the first quarter, nonperforming assets were at $163 million, or 1.69% of total loans. That represents a 73% increase from the year-earlier period. The bank said six loans were shifted to nonperforming status during the quarter, including three commercial loans totaling nearly $12 million; two commercial real estate credits totaling $14 million, and one commercial lease of nearly $4 million.

"This isn't surprising, given the poor performance of the economy over such a long period," Ms. Glossman said.

Pacific Century's stock closed Thursday's trading at $22.44, down 6 cents. +++

Zions Bancorp.

Salt Lake City, Utah

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $48.9 $39.0

Per share 0.61 0.52

ROA 1.13% 1.36%

ROE 19.03% 20.73%

Net interest margin 4.39% 4.55%

Net interest income 169.9 118.6

Noninterest income 63.3 44.8

Noninterest expense 150.2 100.8

Balance Sheet 3/31/99 3/31/98

Assets $17,086.0 $11,304.0

Deposits 13,204.8 8,374.3

Loans 10,906.3 6,034.8

UnionBanCal Corp.

San Francisco

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $118.5 $95.6

Per share 0.69 0.54

ROA 1.30% 1.51%

ROE 14.28% 16.05%

Net interest margin 4.86% 4.83%

Net interest income 340.7 318.6

Noninterest income 139.3 128.0

Noninterest expense 303.0 268.5

Balance Sheet 3/31/99 3/31/98

Assets $32,347.6 $30,904.6

Deposits 23,996.0 23,411.4

Loans 24,352.4 22,504.0

PNC Bank Corp.

Pittsburgh

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $325.0 $269.0

Per share 1.05 0.87

ROA 1.71% 1.51%

ROE 22.94% 21.10%

Net interest margin 3.86% 3.96%

Net interest income 664.0 644.0

Noninterest income 731.0 506.0

Noninterest expense 823.0 708.0

Loss provision 78.0 30.0

Net chargeoffs 78.0 90.0

Balance Sheet 3/31/99 3/31/98

Assets $74,868.0 $72,355.0

Deposits 45,799.0 46,068.0

Loans 52,800.0 54,511.0

Reserve/nonp. loans 230.93% 321.13%

Nonperf. loans/loans 0.55% 0.52%

Nonperf. assets/assets 0.44% 0.46%

Nonperf. assets/loans + OREO 0.62% 0.61%

Leverage cap. ratio 7.28%* 7.36%

Tier 1 cap. ratio 8.10%* 7.67%

Tier 1+2 cap. ratio 11.70%* 11.24%

*Estimated

Pacific Century Financial Corp.

Honolulu

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $35.4 $34.0

Per share 0.44 0.42

ROA 0.96% 0.95%

ROE 12.00% 12.11%

Net interest margin 4.24% 4.29%

Net interest income 143.8 141.7

Noninterest income 61.2 52.9

Noninterest expense 134.8 121.7

Balance Sheet 3/31/99 3/31/98

Assets $14,928.3 $14,757.8

Deposits 9,434.4 9,435.4

Loans 9,208.1 9,025.3

Harris Bank

Chicago

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $54.5 $50.4

Per share NA NA

ROA 0.88% 0.92%

ROE 13.15% 12.28%

Net interest margin 2.93% 3.27%

Net interest income 157.1 156.7

Noninterest income 121.5 113.4

Noninterest expense 186.7 182.5

Balance Sheet 3/31/99 3/31/98

Assets $25,323.0 $22,265.0

Deposits 17,097.0 15,293.0

Loans 13,729.0 12,806.0 ===