BankAmerica Corp. on Thursday reported a hefty $476 million profit for the third quarter, but its stock was pounded because of a sharp rise in goodwill.
While the earnings exceeded analysts' expectations, investors were spooked by a sharp rise in intangible balance sheet items created when the company took writedowns in preparation for asset sales.
The stock price ended Thursday at $41.75, down $2.25. BankAmerica's 3.77 million-share trading volume led the New York Stock Exchange.
Meanwhile, Bankers Trust New York Corp. reported a 14% rise in income, to $211 million.
Three superregionals - Bank of Boston Corp., First Interstate Bancorp, and Midlantic Corp. - also reported strong improvements. And Bank of Boston said it would reinstate its quarterly common stock dividend.
Late Thursday, shares of Bankers Trust were off 62.5 cents, to $65.375, and First Interstate lost 25 cents. to $40.25.
Bank of Boston was up 75 cents, to $21.875, while Midlantic rose 37.5 cents, to $16.25.
The company's earnings were up 67% from the same period last year, before it completed the acquisition of Security Pacific Corp.
Goodwill and other intangible assets totaled $5.37 billion at the end of September, up 18.9% from the previous quarter. The increase was mainly due to the premium over book value paid for Security Pacific and write-downs of problem assets inherited from that company.
Although BankAmerica's capital levels rose modestly in the quarter, some analysts suggested that it may still be forced to raise equity. "People have come to the conclusion that the company is going to have to go to market for common equity," said Thaddeus W. Paluszek, an analyst with Kidder, Peabody & Co.
Frank Newman, chief financial officer, said the company has "no plans at this time" to issue stock. But he told analysts that plans could change if BankAmerica America carries out another major acquisition.
BankAmerica is moving forward with plans to create a separately capitalized collecting bank, but now expects it to be smaller than originally planned, Mr. Newman said. The company would move into the so-called bad bank assets with a face value of roughly $2 billion, mainly California commercial real estate. These have already been written down by an average of 50%, Mr. Newman said.
BankAmerica's nonperforming assets dipped to $4.176 billion at the end of September, down 8.4% in the quarter. But the fall was mainly due to the transfer of assets to a separate accounting category of "assets pending disposition." The company declined to specify the amount of problem assets moved to the disposition category.
BANKERS TRUST NEW YORK
Profits were driven in large part by a 79% jump in interest revenue to $312 million from the year-earlier quarter and by tax benefits.
"Net interest income was very strong, and at BT that is produced on the trading desk," said Raphael Soifer, an analyst at Brown Brothers Harriman & Co. He speculated that the company profited from trading interest rate derivatives.
Bankers Trust recorded tax benefits of $45 million, compared with $14 million a year earlier. Otherwise, Mr. Soifer said, the company would have earned $1.90 a share, compared with $2 in the third quarter of 1991.
Though analysts were expecting a superb trading quarter because of foreign exchange volatility, total trading revenue fell 24% from the year-earlier quarter, to $244 million. Mr. Soifer said that Bankers Trust probably lost money on trading Third World debt and foreign exchange derivatives.
Total noninterest revenue fell 11%, to $590 million. Bankers Trust lost $5 million on investment securities sales but booked a gain of close to $15 million because of accounting changes for LDC trading assets.
Corporate finance fees rose strongly to $98 million - their highest levels in three years and 46% higher than in the year-earlier quarter. Mr. Soifer said the bank completed several deals in developing countries.
Trust income, however, fell to $148 million from $180 million a year earlier.
FIRST INTERSTATE BANCORP
As expected, the Los Angeles company reported a profit turnaround, earning $75.1 million, compared with a $207.5 million loss in the same period last year.
First Interstate has dramatically improved credit quality through an aggressive asset workout program. Problem loans and foreclosed property totaled $1.105 billion at the end of September, down 44% from a year earlier and 9% from the previous quarter.
As a result, the company's loan-loss provision was $60.1 million, 75.6% below the amount provided in the third quarter of 1991 and 31.6% below the second-quarter level.
First Interstate also made strides on expenses and capital. Noninterest costs totaled $537.8 million, down 27.8% from a year ago. though expenses still amounted to a high 75.3% of revenues.
The company's Tier 1 capital ratio was 8.6% of assets, compared with 5.72% a year earlier.
But revenues plunged 12% from a year ago, with sharp drops in both net interest income and noninterest income. Lower revenue resulted mainly from a 15.3% decrease in outstanding loans from the 1991 third quarter.
BANK OF BOSTON CORP.
Bank of Boston Corp. continued to demonstrate that it is in the midst of a strong recovery, reporting its second straight quarter of improved earnings.
Profits were $70 million in the quarter, up 12% from the second quarter and up substantially from the $18 million it earned a year ago.
The bank surprised investors and set its dividend at 10 cents a share per quarter. It eliminated the dividend in January 1991 because of asset quality problems.
"It says a lot about management's confidence going forward," said David Berry, associate director of research at Keefe, Bruyette & Woods Inc., of the dividend increase.
Driving the earnings improvement were lower loan-loss provisions and increased interest income.
Net interest income rose 4.3% to $279 million, while the loan loss provision fell 20% to $20 million.
Analysts had been expecting the provision to remain stable so results were a little better than expectations.
The company, which has $32.7 billion in assets, continued to make significant progress reducing bad assets. They fell 8.4% to $1.255 billion, or 5.6% of loans and foreclosed real estate.
Pending acquisitions of Society for Savings Bancorp and Multibank Financial Corp. should help speed the recovery because they will add desperately needed assets.
Society, which has $2.6 billion in assets, announced earnings of $2.9 million, compared with $1.4 million a year ago.
Multibank, which has $2.5 billion in assets, earned $493,000 in the quarter, compared with a loss of $5.8 million a year ago.
Midlantic continued to make progress in its recovery, earning $17.1 million, compared with $7.8 million in the second quarter and a loss of $23.9 million a year earlier.
The company's profits were fueled by $18 million in securities gains. However, New Jersey's second-largest banking company, with $15 billion in assets, showed substantial progress in reducing bad assets and cutting expenses.
Noninterest expenses, at $155 million, were 9.3% lower than they were in the second quarter, while nonperforming assets fell for the fourth straight quarter to $1.6 billion, a 7.4% decline.
Still, nonperforming assets remain high at 16% of loans and foreclosed real estate. The loan-loss provision, at $18 million, was 31% lower than in the second quarter.
In August, the Edison, N.J.-based company raised $113 million in new capital, boosting its leverage capital ratio to more than 5% from 3.7% at the end of the second quarter.