Banc One Corp. on Tuesday said third-quarter earnings fell 4.4% to $283.2 million, while Huntington Bancshares posted an 8% decline to $55.9 million.
Rising rates influenced results at both of the Columbus, Ohio-based banking companies.
With short-term liabilities set to reprice faster than short-term assets, Banc One's funding costs grew far more than did asset returns, cutting profits. Huntington said rising rates hammered its mortgage banking unit.
The company's net interest margin fell 84 basis points to 5.27%. Net interest income fell 2.7%, despite a 13.6% leap in average total loans.
Working to reduce exposure to rising rates, Banc One sold $2 billion of Treasury securities in the third quarter, incurring a $13 million pretax loss on the transactions.
Also, the company took a $55 million pretax charge for various merger, mortgage consolidation, and legal expenses.
Sandra Flannigan, a bank analyst with Merrill Lynch & Co., predicted that Banc One would promptly begin to rebound. However, the analyst predicted further weakness for Banc One's stock.
Meanwhile, Huntington, a $17 billion-asset bank, said margin compression and a "dramatic" mortgage banking slowdown caused its earnings decline. Annualized returns equaled 1.35% on average assets, a 6-basis-point drop from a year ago; and 15.77% on average equity, down 371 basis points.
Frank Wobst, chairman and chief executive officer, said Huntington's mortgage unit would post a full-year loss of about $10 million, versus a $15 million profit last year.
He said the unit will be restructured, but cautioned that "many of the factors affecting Huntington's third-quarter earnings will continue into the next quarter."
[Tabular Data Omitted]