Strong results from capital markets operations helped boost fourth- quarter earnings at several large banks reporting Wednesday.
BankAmerica Corp., the nation's fourth-biggest bank, posted profits of $812 million, a 9% rise, thanks in part to fees and commissions generated by its recently acquired investment bank Robertson Stephens & Co.
First Union Corp. also got a big lift from capital markets. But, because of the company's November acquisition of Signet Banking Corp., net earnings collapsed 27% from the year-earlier period, to $362 million.
"We're still feeling very good about two areas-capital management and capital markets-that really kicked in," said Robert T. Atwood, First Union's chief financial officer. "The highlight for the year is, we continue to build those nuclear engines."
Republic New York Corp. said its quarterly earnings rose 7%, to $116 million, bolstered by foreign exchange trading and gains on securities and loans held for sale.
And at CoreStates Financial Corp., which agreed in November to sell to First Union, extraordinary items helped push fourth-quarter income up 11%, to $217 million. Excluding the gains, CoreStates would have suffered a 1.5% decline.
Washington Mutual Inc., which reported earnings late Tuesday, posted profits of $238 million, compared to a loss of $82.8 million in the same period of 1996. The prior year's results were depressed by expenses related to acquisitions.
New York-based GreenPoint Financial Corp. said earnings rose 8%, to $37 million, on a 22.5% rise in noninterest income.
Capital market gains and a vibrant California economy helped mitigate Asian market woes for the San Francisco-based giant.
Earnings per share of $1.12 matched analysts' consensus estimates exactly.
"Trading revenues are definitely weaker, as expected, but BankAmerica continues to benefit from the surging California market," said Joseph K. Morford, an analyst with Bankers Trust New York.
Michael E. O'Neill, BankAmerica's chief financial officer, noted during a conference call Wednesday that consumer loan originations rose 18% during the last three months of the year.
"Loan growth was clearly firing on all cylinders, private equity was a nice offset to trading losses, and credit quality held up," Mr. O'Neill said.
Meanwhile, the company's trading income fell 53%, or $71 million, because of problems in Asia. In addition, BankAmerica's net foreign credit losses-nonexistent in the fourth quarter of 1996-climbed $46 million during the latest reporting period, primarily due to soured loans in Thailand.
"Our risk management processes were tested in the fourth quarter by the volatile market conditions in Asia," said chairman and chief executive officer David A. Coulter. But, he said the company was well-prepared to deal with future market fluctuations.
The $259 billion-asset company moved to protect itself from further losses by allocating an additional $580 million of reserves to cover foreign loan losses, bringing that total to just over $1 billion.
Gains in other noninterest income easily made up for the problems at BankAmerica's trading desk. The company increased total noninterest income by 9%, to $1.631 billion, during the fourth quarter.
A chunk of that increase came in the form of $195 million in fees and commissions from Robertson Stephens.
"Robertson Stephens made a very important contribution to noninterest income at the end of last year," Mr. O'Neill said.
In addition, income from private equity investment increased 75% to $188 million, and gains on sales of loans more than tripled, to $93 million.
First Union Corp.
Excluding the costs associated with the Signet deal, quarterly income at $153 billion-asset First Union would have improved 5% from a year ago, the company said.
Operating earnings per share of 81 cents were 4 cents short of analysts' consensus estimates. However, the company and some on Wall Street maintained that profits were skewed by First Union's pooling of interest with Signet.
"If you look at First Union on a stand-alone basis before Signet, the numbers look right in line with estimates," said Lawrence W. Cohn, an analyst with Ryan, Beck & Co.
First Union, based in Charlotte, N.C., depended on revenues from its growing fee-based businesses, including trust, brokerage, insurance, mutual funds and investment banking. Those businesses helped First Union to record a 20% gain in noninterest income over last year's fourth quarter to $905 million.
Loan growth at First Union was more modest, but analysts said that may have been by design. "It would appear they were less aggressive (lending) then they were building fee revenues," said Frank Barkocy of Josephthal & Co.
Net interest income rose 3%, to $1.4 billion. Loan growth "was a little weaker than I thought it would be," said Michael Ancell, an analyst with Edward Jones. "The big challenge for them is adjusting for all the changes going on," including acquisitions.
Noninterest expenses rose 17%, to $1.5 billion. The company also restructured its consumer loan portfolio, including a move of $1.2 billion in credit card receivables into assets held for sale.
Republic New York Corp.
Net interest income at Republic improved 6%, to $266 million, while noninterest expense rose 23%, to $254 million, due to spending in legal issues and technology.
Income from precious metals, usually an area of strength for the company, was down considerably.
"They had a strong, solid quarter with a couple of one-time items that canceled each other out," said Gerard Cassidy, an analyst with Tucker Anthony.
Republic officials said the company's exposure to southeast Asian markets would be minimal because of conservative lending policies.
"Our usual attention to asset quality proved its value, particularly during the global market volatility of the fourth quarter," said chairman and chief executive officer Walter H. Weiner. "We remain confident about 1998. Nevertheless, in order to protect the assets of the bank and those of our clients ... we will not hesitate to reduce our exposure to business and markets should we determine that their risks are becoming excessive."
CoreStates Financial Corp.
Philadelphia-based CoreStates said its earnings reflected special tax benefits of $109 million and a special provision for loan losses of $45 million.
Net interest income was down 2.1% in the quarter, to $532 million. Noninterest income rose 11%, to $249 million. Earnings per share of $1.08 were 9 cents better than estimates, but that was due to the one-time tax gain. Excluding the extraordinary items, earnings per share at the $49 billion-asset company were in line with analysts' estimates.
That's good, according to Wall Street, because the company's merger with First Union is expected to close in April.
Washington Mutual Inc.
Seattle-based Washington Mutual had a "monster quarter," according to R. Jay Tejera, an analyst with Minneapolis-based Dain Rauscher. "They had huge loan origination volume, and that wouldn't happen without a successful integration of the Great Western franchise." Washington Mutual last year acquired Great Western Financial Corp.
A strong California housing market helped the thrift post a 36% gain in loan originations, to $8 billion. Most of the increase came from single- family residential loans, but other loan originations were also up, 19%, to $671 million.
Net interest income increased by 7%, to $688 million, while noninterest income was lifted by 25% growth in fee-generating checking accounts, to $98.5 million.
Progress in the Great Western integration resulted in an expansion of household and checking accounts, said Kerry Killinger, chairman and chief executive officer.
Mr. Killinger also announced plans to extend the Washington Mutual brand name to Great Western and American Savings offices over the next several months.
"Using the Washington Mutual name in all the markets we serve offers us a tremendous marketing opportunity, as we leverage a common name throughout the country," Mr. Killinger said.
GreenPoint Financial Corp.
Earnings per share of 98 cents at GreenPoint beat the analysts' consensus estimate by 2 cents as net interest income at the company rose 2% to $117 million.
"These results demonstrate our ability to generate high levels of profitability and continue our earnings momentum while we maintain pricing discipline and a commitment to credit quality," said Thomas S. Johnson, chairman and chief executive officer.
The $13 billion-asset GreenPoint also cited expense control, which had improved from the same period in 1996, but was still lower than 1997's third quarter. +++
Washington Mutual Inc. Seattle, Wash. Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $237.9 ($82.8) Per share 0.94 (0.38) ROA 0.99% -0.38% ROCE 18.15% -7.81% Net interest margin 3.04% 3.09% Net interest income 687.9 643.6 Noninterest income 225.9 210.6 Noninterest expense 468.3 722.1 Loss provision 51.1 227.6 Net chargeoffs 47.4 107.5 Year to Date 1997 1996 Net income $481.8 $230.1 Per share 1.86 0.81 ROA 0.52% 0.27% ROCE 9.25% 3.87% Net interest margin 3.05% 3.13% Net interest income 2,656.4 2,573.0 Noninterest income 713.4 658.1 Noninterest expense 2,261.6 2,428.6 Loss provision 207.1 392.4 Net chargeoffs 200.1 314.5 Balance Sheet 12/31/97 12/31/96 Assets $97,100.0 $87,400.0 Deposits 51,000.0 52,700.0 Loans 67,100.0 61,100.0 Reserve/nonp. loans 111.60% 117.80% Nonperf. loans/loans 1.20% 1.32% Nonperf. assets/assets 0.83% 0.92% Nonperf. assets/loans + OREO 1.20% 1.31% Leverage cap. ratio NA NA Tier 1 cap. ratio NA NA Tier 1+2 cap. ratio NA NA
First Union Corp. Charlotte, N.C. Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $362.0 $493.0 Per share 0.56 0.79 ROA 1.35% 1.33% ROE 17.53% 18.61% Net interest margin 4.27% 4.21% Net interest income 1,437.0 1,391.0 Noninterest income 905.0 757.0 Noninterest expense 1,450.0 1,238.0 Loss provision 325.0 150.0 Net chargeoffs 131.0 196.0 Year to Date 1997 1996 Net income $1,896.0 $1,615.0 Per share 2.99 2.58 ROA 1.39% 1.30% ROE 18.90% 18.50% Net interest margin 4.36% 4.25% Net interest income 5,819.0 5,557.0 Noninterest income 3,362.0 2,596.0 Noninterest expense 5,320.0 4,737.0 Loss provision 840.0 449.0 Net chargeoffs 635.0 635.0 Balance Sheet 12/31/97 12/31/96 Assets $157,274.0 $151,847.0 Deposits 102,889.0 102,702.0 Loans 96,873.0 102,316.0 Reserve/nonp. loans 195% 215% Nonperf. loans/loans 0.64% 0.67% Nonperf. assets/assets 0.46% 0.53% Nonperf. assets/loans + OREO 0.75% 0.78% Leverage cap. ratio 6.81% 6.13% Tier 1 cap. ratio 8.44% 7.33% Tier 1+2 cap. ratio 13.45% 12.33%
Republic New York Corp. New York Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $116.1 $108.5 Per share 2.02 1.85 ROA 0.77% 0.79% ROE 14.66% 14.82% Net interest margin 2.37% 2.45% Net interest income 266.3 250.7 Noninterest income 147.3 119.9 Noninterest expense 254.3 207.2 Loss provision 4.0 4.0 Net chargeoffs 3.1 3.8 Year to Date 1997 1996 Net income $449.1 $418.8 Per share 7.88 7.07 ROA 0.77% 0.79% ROE 14.69% 15.19% Net interest margin 2.36% 2.48% Net interest income 1,027.9 962.2 Noninterest income 528.3 446.1 Noninterest expense 903.8 785.8 Loss provision 16.0 32.0 Net chargeoffs 11.3 25.0 Balance Sheet 12/31/97 12/31/96 Assets $55,638.0 $52,299.0 Deposits 33,390.0 31,726.0 Loans 12,360.0 11,722.0 Reserve/nonp. loans 348.0% 333.4% Nonperf. loans/loans 0.76% 0.90% Nonperf. assets/assets 0.14% 0.17% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 5.60%* 5.87% Tier 1 cap. ratio 13.15%* 13.80% Tier 1+2 cap. ratio 21.90%* 23.28%
Greenpoint Financial Corp. Flushing, N.Y. Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $36.8 $33.9 Per share 0.98 0.81 ROA 1.64% 1.43% ROE 17.24% 13.25% Net interest margin 3.91% 3.82% Net interest income 116.6 114.6 Noninterest income 13.2 10.8 Noninterest expense 66.7 63.3 Loss provision 4.0 4.9 Net chargeoffs 3.0 4.9 Year to Date 1997 1996 Net income $147.6 $132.5 Per share 3.72 3.02 ROA 1.60% 1.34% ROE 15.68% 12.70% Balance Sheet 12/31/97 12/31/96 Assets $13,083.5 $13,325.6 Deposits 10,973.0 11,452.3 Loans 8,795.6 7,294.3
BankAmerica Corp. San Francisco Dollar amounts in millions (except per share) Fourth Quarter 4Q97 4Q96 Net income $812.0 $747.0 Per share 1.12 0.96 ROA 1.24% 1.21% ROE 16.68% 15.24% Net interest margin 3.90% 4.13% Net interest income 2,107.0 2,130.0 Noninterest income 1,631.0 1,499.0 Noninterest expense 2,209.0 2,250.0 Loss provision 220.0 220.0 Net chargeoffs 214.0 207.0 Year to Date 1997 1996 Net income $3,210.0 $2,873.0 Per share 4.32 3.65 ROA 1.25% 1.19% ROE 16.69% 15.00% Net interest margin 4.06% 4.23% Net interest income 8,669.0 8,587.0 Noninterest income 6,128.0 5,412.0 Noninterest expense 8,521.0 8,341.0 Loss provision 950.0 885.0 Net chargeoffs 901.0 918.0 Balance Sheet 12/31/97 12/31/96 Assets $260,159.0 $250,753.0 Deposits 172,037.0 168,015.0 Loans 167,111.0 165,415.0 Reserve/nonp. loans 389% 315% Nonperf. loans/loans 0.54% 0.68% Nonperf. assets/assets 0.35% 0.45% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio NA NA Tier 1 cap. ratio 7.52% 7.77% Tier 1+2 cap. ratio 11.55% 11.79% ===