Bank of Boston Breaks 1-Year Losing Streak

Bank of Boston Corp. returned to profitability for the first time in a year, reporting Thursday that it earned $18 million in the third quarter.

A large portion of the earnings came from unusually large sales in its venture-capital portfolio.

Also in Boston, BayBanks Inc. posted earnings for the period of $1.1 million, in line with results in its previous two quarters. In the year-earlier quarter, the company reported a loss of $12.3 million.

BANK OF BOSTON

Bank of Boston's results exceeded analysts' expectations. Most had predicted that the company, which had $32.4 billion of assets at Sept. 30, would lose money in the quarter.

The nation's 21st-largest banking company recorded $19 million in gains from selling venture-capital holdings - almost twice as much as it captured from that portfolio in the first half of the year. Bank of Boston also recorded $8 million from the sale of mortgage servicing rights and $3 million from gains on investment securities sales.

"They wouldn't have earned money without those gains," said Gerard Cassidy, an analyst at Tucker, Anthony.

Nevertheless, most analysts said that the positive earnings report is likely to speed up merger negotiations with Shawmut National Corp. The talks have stalled recently, sources said, because of arguments between the companies about hidden credit problems and an insistence by regulators that the two raise more than the $625 million in capital originally agreed upon.

"Does this force them back to the table?" asked Nancy Bush, an analyst at Brown Brothers Harriman & Co. in New York. "Maybe. It says that these are two companies that can no longer be regarded as basket cases."

Shawmut also posted a modest third-quarter profit after three consecutive quarterly losses.

Bank of Boston's $18 million profit contrasted with losses of $49 million in the second quarter and $255 million in the year-earlier quarter. Credit costs appeared to stabilize, with the bank's loan-loss provision of $75 million and chargeoffs of $75 million at the same levels as in the second quarter.

Peter Manning, the company's chief financial officer, said he did not foresee a larger provision in future quarters.

Nonperforming assets dropped by 2%, to $1.71 billion, or 7.87% of total loans and foreclosed real estate at Sept. 30.

The company said that operating earnings - before credit costs and restructuring charges - rose by 30%, to $134 million, from the second quarter.

Expenses exclusive of costs related to foreclosed mortgages fell 3% during the quarter, to $277 million, slightly better than the bank's target, according to Mr. Manning.

BAYBANKS

Analysts said the $1 million profit at BayBanks was slightly better than expected. Earnings were boosted by a strong net interest margin, up 31 basis points, to 4.59%, from last year's third quarter.

BayBanks' earnings also were buoyed by a $9 million investment securities gain. Writeoffs rose 26% from the second quarter, to $44 million, but nonperforming assets fell 1%, or $7 million, to $551 million.

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