Breaking the industry pattern of big profit increases, Bank-America Corp. said its third-quarter earnings rose just 2% from a year earlier, to $486 million.
The results, exactly in line with analysts' expectations, reflected feeble demand from customers, especially in the company's core California market.
Three other large banks also reported earnings Wednesday, but their results showed stronger profit growth that was more in line with third-quarter trends.
Fleet Financial Group earned $127.1 million, up 66%. The Providence, R.I.-based banking company's profit came despite a $125 million charge related to a previously announced cost-reduction program. That charge was offset by $127 million in securities gains.
Profits at CoreStates Financial Corp. rose 26%, to $86 million. Unlike some other regional banks, the Philadelphia-based company saw modest loan growth, higher net interest income, and wider spreads. Credit quality also improved for the fifth consecutive quarter.
Republic New York Corp.'s earnings rose 14.5%, to $77.6 million. Profits from trading and derivatives activities, as well as fees from its brokerage and asset management groups, contributed to the increase, the bank said.
Meanwhile, Washington Mutual Savings Bank, the Pacific Northwest's largest thrift, shattered earnings records with net income of $46.9 million, up 59%.
The companies stocks were little affected by the announcements. BankAmerica closed at 42.625, down 12.5 cents. Fleet was unchanged at $32,125. Republic closed at 50.375, up 37.5 cents, while Corestates closed at $27, up 25 cents.
The results at the nation's second-largest bank company included $26 million in bonuses to all employees except senior managers.
Without the one-time payout, the company would have earned $501 million.
For the first nine months of the year, the company netted $1.458 billion, up 43% from the year before. However, the results are not comparable because the acquisition of Security Pacific Corp. took place during the 1992 second quarter.
On a per-share basis, earnings were $1.18, down 4 cents from the year-earlier period. The issue of per-share earnings is sensitive since it is the most direct measure of whether BankAmerica stockholders have benefited from the acquisition of Security Pacific.
Shareholders were promised big gains as the merger's expense savings and business synergies kicked in. But those effects have so far been offset by California's prolonged business slump and, apparently, Security Pacific's worse-than-expected condition.
"Economic weakness continued to constrain our overall business volume" in the quarter, BankAmerica chairman and chief executive Richard M. Rosenberg said in a statement.
The results contrasted sharply with the big earnings gains registered by money-center banks and large California-based rivals. Many peers have scored big profit gains by cutting credit costs. But Bankamerica's credit woes were not as severe in the current cycle and turnaround effects have been less pronounced.
The company cited five units as its biggest profit contributors in the third quarter: California retail banking; the Seattle-First unit in Washington; Asian operations; corporate banking; and mortgage lending.
BankAmerica's third quarter net interest income was virtually identical to that in the same period a year ago and was up modestly from the preceding quarter. Loan volume continued to edge down.
Noninterest income also declined, with trading profits below the levels of the first two quarters.
Credit provided good news across the board. BankAmerica's problem assets, loan-loss provision, and chargeoffs remained on a strong downward trend. Nonperforming assets totaled $4.517 million at the end of September, down 20.9% from a year ago and 11.9% from the second quarter - thanks to big drops in foreclosed property and nonaccruing construction loans.BankAmerica Corp.San FranciscoDollar amounts in million (except per share) -Third Quarter 3Q93 3Q92Net income $486 $476Per share 1.18 1.22ROA 1.04% 1.00%ROE 11.66% 13.26%Net interest margin 4.76% 4.72%Net interest income 1.887 1,888Noninterest income 1,007 1,032Noninterest expense 1,851 1,791Loss provision 175 260Net chargeoffs 233 371Year to Date 1993 1992Net income $1,458 $1,019Per share 3.56 3.01ROA 1.05% 0.85%ROE 12.11% 11.55%Net interest margin 4.76% 4.65%Net interest income 5,592 4,802Noninterest income 3,154 2,637Noninterest expense 5,552 4,862Loss provision 610 730Net chargeoffs 860 784Balance Sheet 9/30/93 9/30/92Assets $187,109 $186,574Deposits 140,969 140,805Loans 124,767 128,441Reserve/nonp. loans 117.54% 97.12%Nonperf. loans/loan 2.49% 3.20%Nonperf. asset/asset. 2.49% 3.20%Leverage cap. ratio 6.40% 6.04%Tier 1 cap. ratio 7.20% 6.45%Tier 1+1 cap. ratio 11.60% 10.89%
The company's results, which translated to 78 cents a share, were in line with analysts' expectations of 77 cents a share, according to Zacks Investment Research in Chicago.
In addition to the charge for the cost-cutting program, Fleet also took a $56 million charge related to heavy mortgage prepayments amid the refinancing boom. The charge was partially offset by $14 million in hedge gains.
"There's a lot of noise here, but when you filter it out, the quarter still looks good," said Michael Mayo, an analyst at UBS Securities in New York. He estimated that Fleet, on an operating basis, earned close to t7e 78 cents a share reported.
Like other big banks, Fleet benefited from improvements in credit quality. Nonperforming assets fell for the seventh quarter in a row, down $116 million from June 30 to $736 million.
Some credit problems were evident, however, at Fleet Finance, the company's Atlanta-based finance company. The unit broke even in the third quarter, compared to a $4 million gain one year ago, as "asset quality related costs were high due to increased consumer delinquencies."
Fleet's balance sheet still boasts $543 million worth of unrealized securities gains.Fleet Financial GroupProvidence, R.I.Dollar amounts in millions (except per share) -Third Quarter 3Q93 3Q92Net income $127.1 $118.7Per share 0.78 0.72ROA 1.09% 1.05%ROE 16.3% 15.51%Net interest margin 5.08% 5.06%Net interest income 530.7 518.2Noninterest income 445.2 391.3Noninterest expense 687.2 641.3Loss provision 60.5 69.9Net chargeoffs 70.7 71.9Year to Date 1993 1992Net income $352.0 $198.0Per share 2.16 1.25ROA 1.02% 0.59%ROE 15.76% 10.44%Net interest margin 5.06% 4.76%Net interest income 1,562.0 1,469.0Noninterest income 1,146.1 971.7Noninterest expense 1,871.8 1,706.8Loss provision 215.0 348.0Net chargeoffs 284.0 389.0Balance Sheet 9/30/93 9/30/92Assets $46,919.6 $44,841.4Deposits 31,081.9 31,648.0Loans 26,274.6 26,098.7Reserve/nonp. loans 179.65% 162.23%Nonperf. loans/loans 2.15% 2.43%Nonperf. asset/asset 1.57% 1.90%Leverage cap. ratio 7.30% 7.20%Tier 1 cap. ratio 11.40% 11.50%Tier 1+2 cap. ratio 16.40% 16.70%
REPUBLIC NEW YORK
The nation's 20th-largest bank company earned $1.30 a share, 2 cents short of the analysts' consensus estimate compiled by Zacks.
Income from trading activities was up 59%, to 61.9 million, compared to a year ago. The increase came from trading account profits and commissions from a newly established derivative products group.
Nonperforming assets declined $13.8 million from June 30,, to $151.9 million. The decline was related to the sale of foreclosed property and a decline in domestic loans in non-accrual status.Republic New York Corp.New YorkDollar amounts in millions (except per share) --Third Quarter 3Q93 3Q92Net income $77.6 $67.8Per share 1.30 1.13ROA 0.76% 0.72%ROE 15.26% 14.46%Net interest margin 2.49% 2.56%Net interest income 193.0 185.8Noninterest income 108.2 85.2Noninterest expense 157.0 141.9Loss provision 20.0 35.0Net chargeoffs 4.4 228.3Year to Date 1993 1992Net income $221.3 $192.1Per share 3.71 3.21ROA 0.73% 0.70%ROE 15.01% 14.23%Net interest margin 2.49% 2.56%Net interest income 582.8 533.8Noninterest income 284.1 214.7Noninterest expense 460.6 407.3Loss provision 70.0 85.0Net chargeoffs 29.4 71.1Balance Sheet 9/30/93 9/30/92Assets $37,962.0 $33,381.0Deposits 22,380.0 19,033.0Loans 9,031.0 7,952.0Reserve/nonp. loans 247.38% 161.47%Nonperf. loans/loans 1.26% 1.86%Nonperf. asset/asset 0.40% 0.57%Lev. cap. ratio (est.) 5.94% 6.05%Tier 1 cap ratio (est.) 15.92% 16.73%Tier 1+2 ratio (est.) 27.45% 28.92%
The company earned 1.46 cents a share, 5 cents above analysts' consensus estimate compiled by Zacks.
Analysts anticipated a soft quarter for loan growth, but said that spreads, earning assets levels, and revenues were better than they had anticipated.
"They are in some lending businesses that are doing quite well," said Jeffrey Naschek, an analyst at Salomon Brothers Inc.
The net interest margin was up 33 basis points compared to a year ago and 3 basis points compared to June 30.
Albert Mundia, executive vice president of finance, said this quarter's 5.85% margin would probably decline by five basis points in the fourth quarter.
The 59% gain in earnings follows Seattle-based Washington Mutual's acquisition earlier this year of Pacific First Bank, its biggest thrift rival.
Third quarter results equal a 1.27% return on assets, virtually the same as the year-ago level. Total assets were $15.1 billion at the end of September. !!!BEGIN TABLE Earnings at a Glance 3Q net % income in change millions 3Q '92BankAmerica $486.0 +2%Fleet 127.1 +66
RepublicNew York 77.6 +14CoreStates 86.0 +27!!!END TABLE