Chase Earns $136 Million, In Line with 2d Quarter
Chase Manhattan Corp. on Monday reported third-quarter earnings of $136 million, up sharply from a $623 million loss one year earlier when the company took a large provision for restructuring.
The results were roughly even with Chase's $132 million gain in the second quarter. About $60 million of profits in the latest quarter came from one-time payments of interest on Brazilian debt and certain tax benefits.
In late afternoon trading on the New York Stock Exchange, Chase's stock was up 37.5 cents to $18.875 a share as most bigbank stocks dipped.
Analysts, who on average had expected Chase to report $96 million of operating earnings, said they were uncertain whether the bank has turned the corner in its problems with bad loans.
Balancing Act for Earnings
"There was no sign of terrible deterioration, but no sign that things are noticeably better," said Lawrence Cohn, an analyst with Paine Webber Inc., who recently resigned from Chase.
To sustain earnings at current levels, several analysts said, Chase must continue its ruthless cost-cutting efforts to compensate for weak revenue.
Since setting aside $650 million for a major restructuring in September 1990, the nation's third-largest bank has slashed annual gross expenses by $500 million and eliminated 6,000 jobs. Judah Kraushaar, an analyst at Merrill Lynch & Co., estimated that Chase will cut $100 million to $300 million more from annual expenses over the next 12 months.
Ronald Mandle, who follows large banks for Sanford C. Bernstein & Co., said he expects Chase may reach that goal by cutting as many as 2,000 more employees from its roster of 37,300.
Chase's nonperforming loans, excluding those to Third World nations, rose $220 million, or 6.9%, to $3.4 billion. The pace is about the same as in earlier quarters this year and in line with analysts' expectations.
Analysts said the rise in nonperforming consumer loans appeared to be peaking at Chase. But they expressed concern about continued growth of nonperforming commercial real estate loans, which soared to $2.4 billion at the end of the third quarter from $1.5 billion a year ago.
Provisions for credit losses remained flat with the second quarter at $265 million.
Some analysts expressed concern about the bank company's loan-loss reserve strategy. Mr. Cohn said he was troubled by the bank's decision to transfer $100 million from reserves for loans to lesser-developed countries to a general reserve.
The cross-border reserve fell $955 million to 20% of all Third World loans from 37% at the end of the second quarter. The company's total reserve at Sept. 30 stood at $2 billion, or 2.89% of total loans - down from 3.8% at the end of last year.
Table : Chase Manhattan Corp. New York - Dollar amounts in millions (except per share) -Third Quarter 3Q91 3Q90Net income $1360 $(623.0)Per share 0.79 (5.03)ROA 0.53% (2.32%)ROE 10.5% (58.9%)Net interest margin 3.81% 3.33%Net interest income 863.0 795.0Noninterest income 539.0 515.0Noninterest expense 958.0 1,213.0Loss provision 265.0 650.0Net chargeoffs 656.0 360.0 Table : Year To Date 1991 1990Net income $385.0 $(527.0)Per share 2.31 (4.74)ROA 0.51% (0.65%)ROE 10.5% (18.3%)Net interest margin 3.82% 3.40%Net interest income 2,538.0 2,444.0Noninterest income 1,595.0 1,482.0Noninterest expense 2,831.0 3,159.0Loss provision 770.0 1,100.0Net chargeoffs 1,608.0 1,468.0 Table : Balance Sheet 9/30/91 9/30/90Assets $97,366.0 $104,661.0Deposits 70,674.0 72,175.0Loans 67,949.0 77,521.0Reserve/nonp. loans. 44.3% 69.6%Nonperf.loans/loans NA NANonperf. asset/asset. 5.39% 4.62%Leverage Cap. Ratio 4.76% 3.96%Tier 1 Cap. Ratio 5.2% 4.0%Tier 1+2 Cap. Ratio 9.6% 7.8%