First Bank System Inc. reported strong fourth-quarter earnings of $150.7 million Tuesday - possibly bolstering slightly its case for acquiring First Interstate Bancorp.
The Minneapolis-based bank showed a $35.3 million loss a year earlier. Full-year earnings of $568.1 million represented an 86% increase over 1994.
Atlanta-based SunTrust Banks Inc. also reported increase earnings for the fourth quarter Tuesday - up 9.5% to $145 million.
SunTrust, which has $46.5 billion of assets, earned $565.5 million for the full year, an 8% gain.
Like First Bank, SunTrust benefited from a stable margin and strong loan growth. Otherwise, the most noteworthy feature of the quarter was an 8% jump in expenses, mostly attributable to the company's ongoing "growth project," which involves new hiring in key areas to boost future revenues.
First Bank, with $34 billion of assets, felt a greater need than usual to report strong fourth-quarter earnings because it launched a $9.5 billion buyout bid for Los Angeles-based First Interstate in November. Wells Fargo & Co. of San Francisco subsequently put its own $10.7 billion offer for First Interstate on the table.
"It's a solid quarter," said Lehman Brothers analyst Michael Mayo. "They had favorable loan growth, a relatively flat margin and strong growth in trust fees.
"These earnings will probably cause consensus estimates for First Bank to creep up," Mr. Mayo said. "And that can't hurt."
First Bank's net interest income actually declined 2% from the year- earlier quarter to $363.7 million due to runoff in the securities portfolio and costs associated with a stock buyback program. But average loans grew 8% on an annualized basis from the third quarter and were up by 13% excluding residential mortgages.
"A good chunk of that continues to come out of commercial lending, particularly our small-business and middle-market commercial loans, which are up 14% annualized," said chief financial officer Richard A. Zona.
Other factors contributing to First Bank's fourth quarter improvement were noninterest income, up 14% from the year-earlier period on the strength of credit-card and trust fees, lower operating expenses and the stock-buyout program, which spreads per-share earnings over a smaller base.