First Union Corp. reported better-than-expected third-quarter results Thursday, saying profits rose 6%, to $852 million, including gains from the sale of securities as part of a restructuring announced in June.
Without the $150 million in gains, earnings per share of 71 cents beat the estimates of Wall Street analysts by 2 cents. Still, analysts said they have a wait-and-see stance toward the Charlotte, N.C., banking company, which has been beset by sluggish revenue growth and high expenses from merger integrations that did not go as well as expected.
There was a lot of give-and-take in the quarter, said Nancy Bush, an analyst at Prudential Securities.
Three other regional banking companies reported profits in line with expectations. U.S. Bancorp in Minneapolis said profits rose 1.2%, to $401.3 million, as higher expenses offset gains in fee income. PNC Financial Services Group in Pittsburgh said profits rose 6%, to $322 million. Regions Financial Corp. in Birmingham, Ala., said net income fell 2.3%, to $127.9 million.
FIRST UNION CORP.
Revenues from capital markets, which First Union has identified as a high-growth area, fell 9%, to $695 million. The company cited an anticipated decline in equity investment revenues, which plunged to $37 million in the third quarter, from $176 million in the year-earlier period. Revenues from investment banking also declined by 10.6%, to $92 million. In capital management, revenues jumped 49%, to $779 million, aided by a 92% increase to $441 million in revenues from retail brokerage activities.
In a conference call, chairman and chief executive officer G. Kennedy Thompson said he expects nonperforming assets to rise and fourth-quarter results to be in line with the third quarters. Mr. Thompson also said he would name a new chief financial officer within two weeks.
The company had $9.6 million in after-tax charges relating to securities sales. Excluding the charges, earnings per share of 55 cents matched estimates.
Fee income rose 16%, to $827 million, on a 62% gain in investment banking fees, to $97 million. Expenses offset gains. Excluding merger charges, operating expenses rose 15%, to $884.4 million. The net interest margin rose to 4.64%, from 4.75% in the second quarter and 4.84% in the third quarter of 1999.
Nonperforming assets rose 5%, to $425.3 million, because of one commercial credit, the company said.
PNC FINANCIAL SERVICES GROUP
Earnings per share of $1.09 met the estimates. The company has been taking steps to shed less-profitable businesses and focus on asset management, processing, and other fee businesses. This month it announced a deal to sell its mortgage operations to Washington Mutual, which would result in a gain of $250 million in the first quarter.
Fee income rose 23%, to $700 million. Fees from asset management rose 19%, to $208 million, and fees from mutual fund servicing jumped to $168 million, from $56 million last year, reflecting PNCs acquisition of a processing company. Brokerage fees rose 17%, to $61 million. Nonperforming assets were flat against the second quarter, at $354 million.
The company said it expects fourth-quarter earnings to be in a range of $1.10 to $1.15 a share.
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