Continuing to reap the benefits of its Alex. Brown acquisition, Bankers Trust New York Corp. said Thursday its first-quarter net income jumped 11%, to $222 million.
But Cleveland-based National City Corp. posted a 62% decline in net income to $104 million, due to expenses from two acquisitions. Backing out merger charges, earnings rose 7%, to $298 million. However, operating earnings per share were still a penny shy of analysts' consensus estimate.
Banker Trust's earnings per share of $2.01 beat analysts' consensus estimate by a nickel.
Despite a dampening effect from continuing problems in Asia, "Bankers Trust nearly doubled investment banking profits from a year ago, and increased market share in such key businesses as equities underwriting, high-yield securities issuance, and strategic advisory," said chairman and chief executive officer Frank Newman.
Investment banking profits at the $158 billion-asset company totaled $177 million, up 90%. It also benefited from advances in trading and sales, up 70%, and in global institutional services, which grew from $6 million to $19 million.
Total revenue before provisions for trading-related credit losses was up $296 million, or 21%, reflecting growth across the board, company officials said.
The gains helped offset continuing problems related to business in Asia. The company recorded a $60 million provision for trading-related credit losses. Net chargeoffs totaled $51 million, mostly due to swaps with Indonesian and Thai counterparties.
But the company has been decreasing its overseas exposure, reducing cross-border swaps 20%, from $3.5 billion at yearend 1997, to $2.8 billion at the end of the first quarter.
Sanford C. Bernstein & Co. analyst Ronald I. Mandle said BT's performance was in line with that of its peers; Asian credits continued to be problematic, but a strong trading environment fueled fee gains.
"They had some Asian writeoffs that were higher than expected," said Mr. Mandle. But "investment banking revenue was very strong, with equities gains that were particularly robust."
First-quarter acquisitions of Kalamazoo, Mich.-based First of America Bank Corp. and Fort Wayne (Ind.) National Corp. resulted in a $275 million charge at National City.
But analysts were ready for it. The $81 billion-asset company said it would take additional merger charges in the third and fourth quarters and estimated total costs for the two deals to be about $400 million.
"The numbers are a little confusing because of the merger, but the underlying operating earnings look good," said Joseph Stieven, an analyst at Stifel, Nicolaus & Co. in St. Louis.
David A. Daberko, National City chairman and chief executive officer, said the company "had a very strong quarter. We're just beginning to roll out revenue enhancements, and we haven't cut any costs yet. We think we have really strong momentum."
Revenue gains in mortgage banking, asset management, brokerage fees, and the company's processing subsidiary boosted noninterest income 19%, to $500 million.
Loan growth was up, but net interest income didn't reflect the gains due to last year's sale of First of America's Florida operations and narrowing net interest margins. +++
Bankers Trust New York Corp. New York Dollar amounts in millions (except per share) First Quarter 1Q98 1Q97 Net income $222.0 $200.0 Per share 2.01 1.76 ROA 0.60% 0.64% ROE 16.70% 14.70% Net interest margin 1.47% 1.40% Net interest income 402.0 331.0 Noninterest income 1,291.0 1,066.0 Noninterest expense 1,325.0 1,104.0 Loss provision 60.0 0.0 Net chargeoffs 51.0 15.0 Balance Sheet 3/31/98 3/31/97 Assets $157,537.0 $125,341.0 Deposits 46,341.0 35,589.0 Loans 21,873.0 18,040.0 Reserve/nonp. loans 281% 228% Nonperf. loans/loans 1.10% 1.80% Nonperf. assets/assets 0.50% 0.50% Nonperf. assets/loans + OREO 3.60% 3.10% Leverage cap. ratio 4.50%* 5.10% Tier 1 cap. ratio 8.20%* 9.20% Tier 1+2 cap. ratio 14.20%* 15.20%
National City Corp. Cleveland, Ohio Dollar amounts in millions (except per share) First Quarter 1Q98 1Q97 Net income $103.7 $275.6 Per share 0.32 0.82
ROA 0.56% 1.57% ROE 6.70% 17.80% Net interest margin 4.19% 4.38% Net interest income 708.3 702.2 Noninterest income 499.7 418.4 Noninterest expense 979.9 658.2 Loss provision 56.3 58.7 Net chargeoffs 52.4 52.5 Balance Sheet 3/31/98 3/31/97 Assets $80,892.0 $71,793.4 Deposits 55,386.9 52,174.8 Loans 55,476.3 50,154.5 Reserve/nonp. loans 400.19% 405.08% Nonperf. loans/loans 0.43% 0.46% Nonperf. assets/assets 0.35% 0.40% Nonperf. assets/loans + OREO 0.50% 0.56% Leverage cap. ratio 7.50% 8.04% Tier 1 cap. ratio 8.55% 9.88% Tier 1+2 cap. ratio 12.61% 14.26%
Note: Restated to reflect acquisition of First of America Bank Corp. === copyright c 1998 American Banker, Inc. All Rights Reserved. http://www.americanbanker.com