Fee income, trading revenue, and loan growth boosted first-quarter earnings at BankAmerica Corp. and three other major holding companies.
San Francisco-based BankAmerica posted an 8% increase, to $780 million, and had analysts gushing about its best quarterly performance in at least three years.
"Their numbers were the most solid of any of the megabanks," said Joel Silverstein, an analyst with Deutsche Morgan Grenfell Inc. "And that reflects the revenue side, the credit quality side, and the expense side- all the major drivers seemed to have done a great job."
Thomas Brown, an analyst with Donaldson, Lufkin & Jenrette Securities Corp., pointed out that other majors such as Chase Manhattan Corp., Citicorp, and Wells Fargo & Co. have faltered in revenues. "BofA's numbers are just the reverse of that trend," he said.
But in common with the others, BankAmerica's credit card losses were up- by 12%, to $115 million.
Other bottom-line improvements reported Wednesday were 18% at Fleet Financial Group, to $311 million; 11% at Republic New York Corp., to $110.2 million; and 9% at Wachovia Corp., to $163 million.
"In general, the quarter is shaping up to be a solid one with strong performances from many companies," said John A. Pandtle, an analyst with the Robinson-Humphrey Co.
Earnings per share at the nation's third-largest banking company reached $2.05, exceeding expectations by 8 cents.
"If you take a Wells (Fargo & Co.), a Citicorp, or a Chase (Manhattan Corp.), one of the concerns that's popped up is the lack of revenue growth," said Mr. Brown. "But BofA's numbers are just the reverse of that trend."
Loan growth jumped by 13% in the first quarter, excluding the one-time sale of mortgages, with more than 30% of the rise attributable to a rebounding California.
BankAmerica also continued to chip away at expenses, bringing the efficiency ratio down to 53.5% from 55.8% a year earlier. A continued aggressive stock repurchase program contributed to a 131 basis-point increase in return on average equity, to 16.50%.
The credit card loss ratio was 5.57%, but analysts viewed it as in line with problems afflicting the industry as a whole.
Fleet Financial Group
Earnings per share at the No. 11 bank holding company reached $1.10, a penny above the analysts' consensus.
Sales of mutual funds and annuities rose 55% during the quarter, and investment services revenue grew to $103 million. Fleet's new investment banking unit had revenues of $10 million.
"We enter 1997 with great optimism as our customer driven strategy continues to pay dividends," said Terrence Murray, the Boston-based company's chairman and chief executive officer. "The introduction of our investment banking product line early last year has expanded our revenue growth prospects."
Analysts said they were generally pleased with the results. They pointed to a net interest margin of 5.16%-up from 4.43% in the 1996 quarter-as evidence that Fleet's restructuring has improved its bottom line.
"Fleet has changed the mix in its balance sheet," said Sally Pope Davis, an analyst at Goldman Sachs & Co. "The restructuring has been successful from a profit standpoint."
Net interest income rose 23%, to $902 million. The bank attributed the growth to lending business from National Westminster Bank, which it acquired last summer.
Mortgage banking revenues rose to $104 million on higher loan servicing fees and loan production, the bank said.
Net chargeoffs fell to $90 million from $124 million in the fourth quarter, while nonperforming assets fell $19 million to $704 million.
"The bright side is the runoff in loans has abated," said Thomas Theurkauf, analyst at Keefe Bruyette & Woods. "But there are probably more opportunities for Fleet in fee income from investment services. There is not a lot of room for loan growth in its region."
Expenses jumped to $840 million from a year earlier, but fell $17 million from the previous quarter.
Analysts said the decline in expenses indicated that the bank was doing a good job in its integration of Natwest. Ms. Davis rated it "a terrific expense showing."
Republic New York Corp.
Earnings per share at the 18th-largest holding company were $1.89, 4 cents above the consensus.
Net interest income from trading and higher fee income helped fuel the gains, the bank said. Net interest income rose 14% to $253 million.
Income from interest on trading account assets nearly doubled, to $29.2 million. Income from trading activities grew to $46.1 million from $45.5 million.
Fees from funds transfer and brokerage services jumped 32%, to $20.6 million. Income from charges on deposit accounts, trust accounts, and factoring rose 68%, to $29.4 million.
Republic's operating expenses rose to $214.2 million, a 16% increase. The bank attributed the increase to the opening of new foreign offices and on investments in technology.
"Expenses chugged higher, but they had a good trading quarter," said Marni Pont at Keefe Bruyette & Woods. "They are plowing that revenue into technology improvements for their trading floor."
The $47 billion-asset Wachovia matched analysts' per-share estimate of 99 cents.
The net interest income of $405 million and fee income of $201.7 million were each up 9.5%. While mortgage income and capital markets revenues were down, the Winston-Salem, N.C., bank reported a 34% increase in fees from electronic banking activities. Trust income moved up 6%.
"We're very pleased with our operating revenue being up that much," said Robert S. McCoy Jr., Wachovia's chief financial officer. "We had very good growth in the revenue line."
Continued losses from credit cards led to a $48 million provision, an increase of 76% from the first quarter of last year. All but $7.9 million of the $48 million in net loan losses stemmed from credit cards.
In the same period a year earlier, net loan losses totaled $27.2 million. But from the fourth quarter of 1996 to through this year's first quarter, credit card problems actually declined-from $44.6 million.
"When everyone else's are going up, theirs are going down," said R. Harold Schroeder, an analyst with Keefe, Bruyette & Woods Inc. "That's a silver lining." +++
Wachovia Corp. Winston-Salem, N.C. Dollar amounts in millions (except per share) First Quarter 1Q97 1Q96 Net income $163.0 $150.0 Per share 0.99 0.87 ROA 1.42% 1.35% ROE 17.86% 16.26% Net interest margin 4.14% 3.95% Net interest income 405.0 370.0 Noninterest income 202.0 185.0 Noninterest expense 324.0 308.0 Loss provision 48.0 27.0 Net chargeoffs 48.0 27.0 Balance Sheet 3/31/97 3/31/96 Assets $47,491.0 $45,425.0 Deposits 28,832.0 25,909.0 Loans 32,570.0 29,869.0 Reserve/nonp. loans 707% 707% Nonperf. loans/loans 0.18% 0.19% Nonperf. assets/assets 0.15% 0.17% Nonperf. assets/loans + OREO 0.23% 0.26% Leverage cap. ratio NA 8.22% Tier 1 cap. ratio 9.80%* 9.39% Tier 1+2 cap. ratio 13.40%* 13.55%
Republic New York Corp. New York Dollar amounts in millions (except per share) First Quarter 1Q97 1Q96 Net income $110.2 $99.6 Per share 1.89 1.64 ROA 0.79% 0.80% ROE 15.10% 15.10% Net interest margin 2.47% 2.50% Net interest income 253.6 223.1 Noninterest income 126.4 107.3 Noninterest expense 214.2 184.3 Loss provision 4.0 4.0 Net chargeoffs 0.7 7.9 Balance Sheet 3/31/97 3/31/96 Assets $54,969.0 $47,144.0 Deposits 31,919.0 29,107.0 Loans 12,286.0 11,063.0 Reserve/nonp. loans 544.29% 490.26% Nonperf. loans/loans 0.53% 0.63% Nonperf. assets/assets 0.18% 0.22% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 5.50%* 5.57% Tier 1 cap. ratio 12.70%* 13.25% Tier 1+2 cap. ratio 21.40%* 22.68%
*Estimated Fleet Financial Group Inc. Boston Dollar amounts in millions (except per share) First Quarter 1Q97 1Q96 Net income $311.0 $264.0 Per share 1.10 0.94 ROA 1.52% 1.41% ROE 18.82% 16.96% Net interest margin 5.16% 4.43% Net interest income 902.0 732.0 Noninterest income 526.0 478.0 Noninterest expense 840.0 717.0 Loss provision 65.0 35.0 Net chargeoffs 90.0 60.0 Balance Sheet 3/31/97 3/31/96 Assets $81,692.0 $72,123.0 Deposits 64,139.0 50,121.0 Loans 59,054.0 47,559.0 Reserve/nonp. loans 217.08% 257.88% Nonperf. loans/loans 1.14% 1.05% Nonperf. assets/assets 0.86% 0.77% Nonperf. assets/loans + OREO 1.19% 1.16% Leverage cap. ratio 7.24% 7.88% Tier 1 cap. ratio 7.56% 9.18% Tier 1+2 cap. ratio 11.27% 13.03% Bank of America Corp. San Francisco Dollar amounts in millions (except per share) First Quarter 1Q97 1Q96 Net income $780.0 $720.0 Per share 2.05 1.79 ROA 1.25% 1.22% ROE 16.50% 15.19% Net interest margin 4.16% 4.36% Net interest income 2,174.0 2,146.0 Noninterest income 1,385.0 1,274.0 Noninterest expense 2,033.0 2,013.0 Loss provision 220.0 180.0 Net chargeoffs 204.0 239.0 Balance Sheet 3/31/97 3/31/96 Assets $249,904.0 $234,243.0 Deposits 168,999.0 160,517.0 Loans 167,338.0 156,155.0 Reserve/nonp. loans 268.03% 195.53% Nonperf. loans/loans 0.79% 1.15% Nonperf. assets/assets 0.53% 0.76% Nonperf. assets/loans + OREO 0.79% 0.97% Leverage cap. ratio 7.36% 6.77% Tier 1 cap. ratio 7.84% 7.30% Tier 1+2 cap. ratio NA 11.50% ===