Bankers Trust Net Bolstered By Trading; Mellon Up 6%
Propelled again by strong trading profits, Bankers Trust New York Corp. reported a 9% increase in third-quarter earnings, to $185 million.
The company said Tuesday that trading revenue surged to $323 million, 22% more than in the third quarter of 1990. Bankers Trust benefited from declines in interest rates during the quarter and the volatility that resulted in its trading markets.
Also reporting an earnings improvement Tuesday was Mellon Bank Corp., which cited a 16% rise in service fees and trading revenue, to $186 million. Mellon's net of $70 million was 6% better than in the 1990 period.
Despite analysts' criticisms that Bankers Trust may be too dependent on trading income, its stock rose 37.5 cents Tuesday, to $63.625 a share. Mellon rose 75 cents, to $35.375.
On the down side, Marine Midland Banks Inc. reported a $56.9 million loss and said it got the latest in a series of capital infusions by its parent, HSBC Holdings, London.
First Nationwide Financial Corp., the thrift subsidiary of Ford Motor Co., said it lost $20.4 million in the quarter and $47.8 million in the first nine months of 1991.
For Bankers Trust, "all in all, it was a very good quarter," said Raphael Soifer, an analyst at Brown Brothers Harriman & Co. He said it was the best showing in six quarters for Bankers Trust, the eighth-largest U.S. banking company, with $62.7 billion in assets.
Aside from its trading gains - a characteristic it shared with rival J.P. Morgan & Co., which reported a 79% earnings increase last Thursday - Bankers Trust had sharply improved results from investment management fees. They rose to $146 million, 20% more than in the 1990 third quarter.
Net income, equal to $2.17 a share, was significantly greater than analysts' consensus estimate of $1.71, according to First Call Corp., an affiliate of American Banker.
The biggest negative in the earnings report was an increase in nonperforming assets. Nonperforming real estate loans rose 20%, to $732 million, while poorly performing leveraged buyout loans grew 13%, to $527 million.
Bankers Trust added $60 million to its reserve for credit losses, bringing total reserves for non-lesser-developed-country loans to $1 billion, or a healthy 69% of the total. The provision rose from $50 million in the second quarter.
Noninterest expenses rose 4%, to $554 million, from a year earlier but would have dropped 5% if performance bonuses and severance benefits were excluded. Staff levels declined by 9%, to 12,148, in the first nine months of 1991. "That's real strong cost control," said J. Richard Fredericks, an analyst at Montgomery Securities.
Net interest income declined 17% from the year-earlier quarter, to $174 million, reflecting a continued move away from traditional bank lending.
Mellon Bank Corp. showed a 6% year-to-year increase in third-quarter earnings, to $70 million. The profit figure was unchanged from the second quarter this year.
The Pittsburgh-based holding company suffered a substantial deterioration in asset quality as problem assets reached $932 million, 32% more than at Sept. 30, 1990, and equal to 4.9% of gross loans.
The rate of decay slowed in the third quarter, however, when problem assets grew by only 2.76%, or $25 million.
"The problems are becoming more manageable," said Denis Laplante, an analyst at Fox-Pitt Kelton Inc., New York.
For the nine months, Mellon earned $208 million, or $3.53 per common share. The annualized return on average assets was 0.95%; return on average equity, 16.2%. The $29 billion-asset company earned $199 million in the first nine months of 1990, excluding a $74 million nonrecurring gain.
Growth in net interest income, service-fee income, and trading revenues, combined with gains from securities sales, helped Mellon absorb a loan-loss provision of $80 million, up 78% from its provision in the third quarter of 1990 and up 60% from the second quarter of 1991. Net chargeoffs were $59 million, up 43% from $41 million a year ago.
Mellon finished the third quarter with reserves of $547 million, or 96% of problem loans. The reserve ratio the year before was 88%.
Marine Midland Banks Inc. suffered its sixth consecutive quarterly loss, prompting yet another capital infusion by its international parent, HSBC Holdings. The $56.9 million deficit was up sharply from $37 million in the previous quarter but down from a $111.5 million loss in the year-ago quarter.
Marine has lost $166 million so far this year, 26% more than in 1990.
John Bond, president and chief executive officer of the $16.9 billion-asset Marine, termed the results "disappointing" and said provisions against loan losses and real estate lending writeoffs are still at "unacceptably high levels."
The $200 million capital injection by HSBC, which also owns Hongkong and Shanghai Banking Corp., came on top of a $300 million infusion last year.
Analysts doubted that Buffalo-based Marine would return to profitability soon. "What's holding things up is the real estate market in New York," said Martin Cross, an analyst at S.G. Warburg in London. "That's the main problem."
"Both the capital injection and underlying figures suggest that the bank will eventually turn around," Mr. Cross said.
Contributing to the new round of losses were $17.2 million in restructuring costs, a $6.6 million writedown of securities holdings, and $47.7 million added to loan-loss reserves. The latter figure totaled $603 million at Sept. 30, or 63% of the company's $942 million in nonaccruing loans.
About 46% of the problem loans, $434 million, are real estate-related.
First Nationwide Financial Corp.'s third-quarter loss of $20.4 million was an improvement on its $44.6 million loss in the year-earlier quarter. The nine-month loss was $47.8 million, compared to a 1990 gain in the first nine months of $32.6 million.
The Ford Motor Co. unit, parent of the nation's sixth-largest thrift, said both results were influenced by credit losses and related reserving but the nonperforming assets are stabilizing. Average nonperformers in the third quarter totaled $1.2 billion.
Reflecting restructuring actions, chairman John M. Devine said third-quarter operating costs were down 9% and personnel levels down 14% from last year. Assets fell 11%.
Table : Mellon Bank Corp. Pittsburgh
Dollar amounts in millions (except per share)Third Quarter 3Q91 3Q90Net income $70.0 $66.0Per share 1.10 1.19ROA 0.96% 0.85%ROE 14.74% 15.29%Net interest margin 3.84% 3.40%Net interest income 243.0 228.0Noninterest income 227.0 170.0Noninterest expense 313.0 282.0Loss provision 80.0 45.0Net chargeoffs 59.0 41.0Year to Date 1991 1990Net income $208.0 $273.0Per share 3.53 5.27ROA 0.95% 1.20%ROE 16.16% 24.26%Net interest margin 3.75% 3.15%Net interest income 716.0 634.0Noninterest income 609.0 644.0Noninterest expense 921.0 846.0Loss provision 175.0 140.0Net chargeoffs 163.0 315.0Balance Sheet 9/30/91 9/30/90Assets $28,955.0 $29,391.0Deposits 21,772.0 22,530.0Loans 18,688.0 18,579.0Reserve/nonp. loans 96.0% 88.0%Nonperf. loans/loans 3.05% 2.70%Nonperf. asset/asset 3.22% 2.40%Leverage Cap. Ratio 5.65% 4.30%Tier 1 Cap. Ratio 5.95% 4.59%Tier 1+2 Cap. Ratio 10.15% 8.42%
Table : Bankers Trust New York
Dollar amounts in millions (except per share)Third Quarter 3Q91 3Q90Net income $185.0 $170.0Per share 2.17 1.98ROA 1.27% 1.06%ROE 25.26% 26.52%Net interest margin 1.40% 1.46%Net interest income 174.0 210.0Noninterest income 669.0 604.0Noninterest expense 554.0 533.0Loss provision 060.0 053.0Net chargeoffs 216.0 051.0Year to Date 1991 1990Net income $530.0 $542.0Per share 6.18 6.40ROA 1.19% 1.13%ROE 25.12% 29.93%Net interest margin 1.54% 1.51%Net interest income 592.0 655.0Noninterest income 1,951.0 1,796.0Noninterest expense 1,679.0 1,586.0Loss provision 163.0 121.0Net chargeoffs 370.0 355.0Balance Sheet 9/30/91 9/30/90Assets 62,700.0 0,000.0Deposits 22,984.0 29,245.0Loans 18,565.0 20,225.0Reserve/nonp. loans 67.80% 99.60%Nonperf. loans/loans 14.30% 10.80%Nonperf. asset/asset 4.60% 3.80%Leverage Cap. Ratio 5.60% 4.20%Tier 1 Cap. Ratio 6.00% 5.20%Tier 1+2 Cap. Ratio 10.90% 9.90%
Table : Marine Midland Banks Buffalo, N.Y.
Dollar amounts in millions (except per share)Third Quarter 3Q91 3Q90Net income ($56.9) ($111.5)Per share NA NAROA (1.38%) (1.81%)ROE (26.43%) (39.62%)Net interest margin NA NA%Net interest income 163.2 192.6Noninterest income 88.3 91.4Noninterest expense 232.4 220.9Loss provision 142.7 172.0Net chargeoffs 147.2 171.6Year to Date 1991 1990Net income ($166.2) ($131.3)Per share NA NAROA (1.22%) (0.66%)ROE (24.87%) (17.18%)Net interest margin NA NANet interest income 320.22 285.4Noninterest income 249.2 325.3Noninterest expense 726.2 732.6Loss provision 189.0 383.0Net chargeoffs 402.3 421.6Balance Sheet 9/30/91 9/30/90Assets $16,942.0 $23,618.0Deposits 13,537.0 16,608.0Loans 11,737.0 19,546.0Reserve/nonp. loans 53.6% 49.11%Nonperf. loans/loans 8.03% 6.04%Nonperf. asset/asset 8.04% NALeverage Cap. Ratio 6.00% NATier 1 Cap. Ratio 46% 5.21%Tier 1+2 Cap. Ratio NA NA