profit gains Wednesday, but the strong showing did not dispel analysts' worries that earnings are likely to slow in quarters to come.
Net income at Chase Manhattan Corp. rebounded handily from last year's emerging-markets crisis, jumping 42%, to $1.2 billion. Bad loans rose 32%, to $2.02 billion.
At the newly formed Fleet Boston Corp., earnings rose 41%, to $711 million. There too, weak credits trended up. Nonperforming assets rose 15%, to $786 million, or 0.66% of total loans, in part because of Fleet's acquisition of Sanwa Business Credit.
"We are seeing moderate increases in nonperforming assets," said Joseph Duwan of Keefe, Bruyette & Woods Inc. "Revenue growth issues are still out there and may continue to be."
Though analysts did not predict a downturn that would push most bank loans into trouble, they did envision a softening economy that could lead to further growth in nonperformers.
"Our view here is that we will not have a recession," said Lori Appelbaum of Goldman, Sachs & Co. "We think gross domestic product will trend 2% to 3%. Having said that, I think you will see some deterioration in credit portfolios, although it won't be drastic."
The nation's third-largest banking company beat Wall Street expectations by a nickel, with earnings per share of $1.37.
Total revenues jumped 23%, to $5.2 billion, on robust growth in corporate and market-related activities and big gains in retail services.
Global wholesale banking revenues rose 61%, to $2.2 billion, and profits from the business, which includes trading, investment banking, and commercial lending, doubled to $674 million. Revenues from investment banking activities rose 51%, to $486 million. Revenues from equity investments soared more than sixfold, to $377 million.
Analysts said the $371 billion-asset company posted stronger than expected gains in venture capital and market-related activities. But like others with substantial wholesale operations, Chase failed to reach the lofty levels reported for the second quarter.
For example, revenues from trading soared to $679 million, nine times the level of last year's third quarter, but fell 8% short of second-quarter levels.
"It is a more challenging, competitive environment," said Henry Dickson, an analyst at Citigroup's Salomon Smith Barney unit. "The easier growth is not available. Earnings comparisons will show more of a divergence."
"The second quarter wasn't sustainable," said Thomas Theurkauf, an analyst at Keefe, Bruyette.
Credit quality, also a focal point for analysts this quarter, showed some signs of wear. However, many analysts said it has not deteriorated to alarming levels.
At Chase, nonperforming assets rose 24% from the second quarter. About $300 million of the increase was attributed to a single loan overseas. Without that spike, "credit costs appear to be relatively stable" at Chase, Mr. Dickson said.
Chase said its pipeline for investment banking deals looks strong going into the last three months of the year. The company last month agreed to buy San Francisco-based Hambrecht & Quist, a boutique securities underwriting and merger advisory firm catering to high-tech and Internet companies.
William B. Harrison Jr., Chase's president and chief executive officer, said that the acquisition, as well as investments in Internet projects, "will accelerate our ability to take advantage of the significant growth opportunities we see in the Chase franchise."
At a meeting with analysts, Marc J. Shapiro, vice chairman of finance and risk management, said, "Chase is a growth story."
In consumer banking operations, Chase's revenues rose 9%, to $2.5 billion, and profits rose 25%, to $435 million. Revenues from credit cards rose 3%, to just over $1 billion, but profits from card operations jumped 36% as loss ratios dropped to 5.53% of managed receivables from 6.19% in the third quarter last year.
Revenues from mortgage and home finance rose 17%, to $307 million. Revenues from regional banking rose 8.5%, to $611 million on higher deposit balances and consumer banking fees, the company said.
Revenues from global investor services operations rose 13%, to $801 million, and profits on that business rose 25%, to $150 million, due to greater expense controls, the company said.
Chase's shares ended Wednesday's trading at $75.8125, up $4.6875, a 6.59% gain, and the American Banker index of the top 50 bank stocks rose 2.24%, to 566.8.
Fleet Boston said its earnings per share of 74 cents beat the analysts' consensus by a penny.
The $185.3 billion-asset banking company is the result of the merger of Fleet Financial Group and BankBoston Corp., which was completed this month. Eugene McQuade, vice chairman and chief financial officer, said that integration "is going exceptionally well. In everything, we've met or exceeded our timetables."
Also on Wednesday, Fleet promoted three executives to higher-profile roles in the post-merger company. Peter Manning, formerly head of merger and acquisition strategy at BankBoston, became vice chairman and head of strategic business development. Brian Moynihan, formerly head of mergers and acquisition strategy at Fleet, took on a similar role in the new Fleet Boston. Mr. Moynihan also runs the merger integration office. Both executives report to H. Jay Sarles, a vice chairman.
Anne Finucane, formerly senior vice president for marketing and communications at Fleet, was named executive vice president for the combined company. Ms. Finucane reports to Charles K. Gifford, president and chief operating officer.
Analysts said the two companies had appeared on track for a strong third quarter anyway and that their combination accelerated the momentum. "It was a good quarter out of the gate," said Salomon's Mr. Dickson.
Fee income at Fleet totaled $1.7 billion, up 37% from last year on big gains in capital markets, investment services, and credit cards. Fees made up half of total revenues, which grew 20%, to $3.4 billion.
Revenues from capital markets activities doubled, to $471 million, on jumps in trading, private equity investments, and investment banking fees from the company's San Francisco-based Robertson Stephens & Co. unit. Investment services revenues gained 22%, to $363 million, on strong transaction volume through New York-based Quick & Reilly Group, the company said.
Credit card revenues grew 43%, to $193 million, bolstered by Fleet's acquisitions of several portfolios early this year as well as a drop in chargeoffs, to 7% of owned receivables from 9%, Mr. McQuade said.
Expenses rose 10%, to $2 billion. The company said merger-related savings will begin to appear in the fourth quarter report. The year-ago period included one-time charges of $125 million for acquisitions and cost cutting at the two predecessor companies.
Fleet Boston shares ended Wednesday's trading at $38, up 43.75 cents, or 1.16%.
Investment management, capital markets, and mortgage fees helped boost PNC Bank Corp.'s third-quarter net income 13%, to $320 million.
The Pittsburgh banking company said Wednesday that growth at several of its subsidiaries, including its BlackRock investment management subsidiary, boosted noninterest income to 51% of overall revenue. As a result, $74 billion-asset PNC beat analysts' per share earnings consensus of 99 cents by a penny.
"This is the best quarter that PNC has reported in five years," said Denis LaPlante, an analyst at Fox-Pitt, Kelton Inc. in New York. "Their revenue growth in a few key sectors was very good."
Overall, noninterest income climbed 23%, to $651 million. That includes a $27 million gain from the sale of 12 branches to Northwest Bancorp and CNB Financial Corp., two northeastern community banks. Ignoring the branch-sale gains, noninterest income climbed 18%.
A big part of the increase came from asset management fees, which grew 22%, to $175 million. PNC said it snared a significant amount of new business in this area; assets under management grew 27%, to $193 billion.
Net residential mortgage banking fees grew 60%, to $75 million, due primarily to a growing servicing portfolio, the banking company said.
Net interest income shrank 8%, to $594 million, compared to the year earlier. PNC cited the sale of its credit card business to MBNA Corp. in the first quarter. Excluding the sale, net interest income climbed 5%.
Nonperforming assets at PNC grew 10%, to $361 million, compared with the year earlier.
Shares in PNC ended Wednesday's trading at $54.0625, up 93.75 cents, or 1.76%.
Republic reported net income of $126.5 million, or $1.15 per share, a significant improvement over last year's third-quarter loss of $92.7 million.
The performance bested consensus estimates by 16 cents. "Our core and special niche businesses have continued to perform to our expectations," said Dov C. Schlein, chairman and chief executive officer.
The $53 billion-asset bank has been scaling back some businesses to focus more on private banking and niche commercial services like precious metals trading. In May, Republic agreed to be bought by HSBC Holdings PLC of London. Consummation of that deal has been delayed several times.
Noninterest income of $149.5 million compared with a loss of $99.8 million last year. Revenues from trading activities rose 19%, to $57 million, primarily from gains in precious metals trading and in commissions, the bank said.
Nonperforming assets fell 55%, to $61 million. Expenses fell 5%, to $232 million. Shares of Republic ended Wednesday's trading at $61.9375, up 25 cents, or 0.41%.
Citing significant growth across its southeastern business area, SouthTrust said Wednesday that net income in the third quarter climbed 19%, to a record $113 million.
President and chief executive Wallace D. Malone Jr. said that two third-quarter acquisitions in Texas helped the Birmingham, Ala., banking company increase assets by roughly 20%, to $42.5 billion. In addition, SouthTrust has been raising its cross-selling, he said.
"SouthTrust's above-average growth is the result of doing more and more business with our existing customers," he said.
The banking company surpassed analysts' per share earnings estimate of 66 cents by a penny.
"This is one of the best quarters I've seen for SouthTrust," said Goldman's Ms. Appelbaum.
"The acquisition in Florida is really starting to pay off," Ms. Appelbaum said.
Net loans rose 20%, to $30.2 billion. This helped boost net interest income 20%, to $356 million.
SouthTrust bucked a general trend among banking companies reporting greater numbers of nonperforming assets. Its total dropped 5%, to $159 million.
"SouthTrust has one of the cleanest credit qualities in the industry," Ms. Appelbaum said.
Shares in SouthTrust ended Wednesday's trading at $36.65625, up 46.875 cents, a 1.30% gain.
Reporting results late Tuesday, the nation's largest thrift company said its third-quarter net income dropped 16%, to $470 million. However, last year's third quarter was helped by a $171 million special gain on the sale of branches.
Disregarding the one-time gain, Seattle-based Washington Mutual said it earned $478 million, or 19% more than it did in the third quarter of last year. The $180.8 billion-asset thrift company beat analysts' consensus of 83 cents a share by a penny.
Retail fee income climbed 32%, to $198 million, and securities and insurance fees and commissions increased 25%, to $81 million, the thrift company said.
A slowdown in mortgage refinancings and in demand for fixed-rate home loans put a dent in mortgage banking. Mortgage banking income was $15 million in the third quarter, a 57% decrease from the year earlier.