With sparkling results in market-related activities such as investment banking and trading, the nation's two largest banking companies reported robust second-quarter earnings.

Chase Manhattan Corp. said Tuesday that profits rose 16%, to $1.07 billion, with strong revenue growth across all business lines. Investment banking fees, for example, jumped 55%, to $438 million, and equity-related investing revenues soared 93%, to $370 million.

"They are playing to their strength in the wholesale business," said George Bicher, an analyst at BT Alex. Brown.

At Citicorp, gains from trading and securities sales helped to offset rising expenses and continued weakness in Asia. The New York-based company said profits increased 7%, to $1.09 billion, even as expenses surged 22%, to $3.88 billion, and Asian credit costs increased $67 million.

While analysts saw Citicorp's expenses as a cause for concern, they said its pending merger with Travelers Group would provide ample opportunity to cut costs.

"The cost side will take care of itself," Mr. Bicher said. "A lot more of the expenses will go away."

Two other banking companies in the midst of megamergers released healthy second-quarter reports.

Wells Fargo & Co., preparing to combine with Norwest Corp., posted a 48% jump in net income, to $337 million, on robust fee income and the sale of its mortgage servicing business.

Banc One Corp., ahead of its merger with First Chicago NBD Corp., earned $487 million, compared with $49 million a year earlier. Excluding nonrecurring charges in the 1997 quarter, net income rose 63%, to $615 million.

Bucking a trend evident in other recent bank earnings statements, Wells and Banc One both had solid loan growth that contributed to earnings gains.

At San Francisco-based Wells, commercial loans were up 9% to $21.3 billion. The net interest margin rose 21 basis points from the first quarter, to 6.22%.

Banc One of Columbus, Ohio, said managed loans, which include securitized credit card receivables, rose 12%. The net interest margin on managed loans was up 22 basis points from the 1997 second quarter, to 6.33%

'We're seeing some of the same themes," said Joseph Duwan, an analyst with Keefe, Bruyette & Woods Inc. "The fee side is driving most of the revenue growth, but Banc One might be a little different in that you see loan growth is pretty solid."

Mellon Bank Corp., the Pittsburgh-based banking company long driven by fee-based businesses, said net income rose 13%, to $215 million. Investment management and institutional trust drove noninterest income up 32%, to $713 million.

Frank V. Cahouet, Mellon's chairman and chief executive officer, said the report vindicated the bank's refusal to accept Bank of New York Co.'s unsolicited takeover offer. "The performance in the second quarter shows that our strategy is working," he said.

Chase Manhattan Corp.

Earnings per share of $1.20 beat Wall Street estimates by a penny.

The New York money-center said it had solid revenue growth in all three main businesses: corporate banking, consumer banking, and technology services. Revenues surged 15%, to $4.8 billion.

"They are well-positioned to sustain good revenue growth for the second half of the year," said Henry C. Dickson, an analyst at Salomon Smith Barney.

Revenues from global corporate banking jumped 15%, to $2.5 billion. Fees from high-yield and investment grade bond underwriting, loan syndications, and mergers-and-acquisition advisory offset an 18% decline to $517 million in trading revenues due to weakness in the emerging markets.

"Outstanding," said Diane Glossman, an analyst at Lehman Brothers. "They are clearly taking advantage of market opportunities."

Fees from personal trust, custody, and asset management rose 19%, to $383 million.

In consumer banking, revenues were up 12%, to $2 billion. Credit card fees surged 63%, to $365 million, while mortgage origination revenues grew 180%, to $84 million. Refinancings, however, drove mortgage servicing fees down 21%, to $49 million.

Revenues in technology-based businesses, which includes Chase Treasury Solutions, investor services and global trust, were up 14%, to $642 million.

Nonperforming assets rose 23%, to $1.36 billion, while net chargeoffs in credit cards grew to 5.94% from 5.92% a year before.

Chase said it reduced its exposure in Indonesia, Thailand, and Korea by 17% during the quarter, to $6.2 billion. Credit costs in the region rose $43 million.

Expenses rose 10%, to $2.7 billion, due to an $8 million restructuring charge and higher incentive compensation for investment bankers. The restructuring charge is the bank's last related to its 1996 merger with Chemical Banking Corp.


Earnings per share at $331 billion-asset Citicorp were $2.30, beating the consensus estimate by a penny.

The company said it has already begun cross-selling experiments with Travelers Group as they await completion of their $70 billion merger. Citicorp is "likely to enter the merger, if approved, with good momentum," said John S. Reed, chairman and chief executive officer.

"The question is whether they can maintain this momentum in earnings growth with expenses" at current levels, said Lawrence Cohn, an analyst at Ryan Beck & Co. "It's going to be a Travelers problem next."

As at most other banks reporting this quarter, noninterest revenues grew faster than interest income. Fees jumped 31%, to $3.2 billion, on the strength of trading activities.

Foreign exchange revenues grew 50%, to $465 million, while revenue from securities transactions more than doubled, to $300 million. Interest income was up 3%, to $2.34 billion.

In consumer banking, revenues in the U.S. and other developed countries rose 22%, offsetting a 6% decline in emerging markets. Overall consumer revenues grew 14%, to $4 billion.

Citicorp acquired AT&T Corp.'s $14.5 billion credit card portfolio during the second quarter, which helped push card revenues up 22%, to $2.1 billion. Analysts said credit quality in the U.S. card business improved, with credit costs declining to 5.73% of average managed loans, down from 6.13% last year.

Revenues from global corporate banking grew 21%, to $2.4 billion. Relationship banking revenues were up 26%, to $1.2 billion, while revenues from corporate services in emerging markets grew 15%, to $1.1 billion.

Banc One Corp.

Excluding merger expenses in the 1997 and 1998 second quarters, the $124 billion-asset Banc One's earnings per share came in at 86 cents, 2 cents better than analysts' estimates.

"One of the significant drivers of earnings continues to be our ability to generate loan growth in all lines of business," said chief financial officer Michael J. McMennamin.

Noninterest income was up $46% to $1.3 billion, including a 14% increase in loan servicing income, a 27% increase in securities brokerage fees, and a 16% increase in investment management and advisory activities.

Net interest income rose 2%, to $1.4 billion, but Banc One said "managed net interest income," which includes its credit card and other securitized loans, was up 9%, to $2.2 billion.

In addition to nonrecurring expenses and gains associated with last year's acquisition of First USA Inc. and this year's merger with First Commerce Corp., Banc One gained $186 million before taxes on the sale of branches and its mortgage servicing business.

Noninterest expenses included $261 million pretax in nonrecurring technology, automated teller machine, and other retail delivery costs.

Wells Fargo & Co.

The earnings per share of $3.87 surpassed analysts' estimates by 9 cents.

"We had hoped to see strong numbers this quarter and Wells exceeded our expectations," said James R. Bradshaw, an analyst with Pacific Crest Securities of Portland, Ore.

The $93.2 billion-asset Wells gained $58 million from the April sale of its mortgage servicing business to a unit of General Motors Acceptance Corp.

Noninterest income increased 8%, to $735 million. Behind this were a 30% climb, to $43 million, in loan fees and charges; a 13% jump, to $62 million, in credit card fees; and a 44% rise, to $23 million, in mutual fund and annuity sales fees.

Wells also reduced the expense category it calls operating losses by 86%, to $25 million. In the 1997 quarter, Wells posted a $180 million operating loss related to the integration of First Interstate Bancorp, acquired in 1996.

Analysts were impressed by the net interest margin, which increased 21 basis points, to 6.22%.

"That is outstanding for a bank their size," Mr. Bradshaw said. "They are getting rid of higher-cost borrowings, replacing them with commercial loan growth, and getting back some quality customers."

However, analysts said they were disappointed by a 5% drop in deposits, to $70.2 billion. Also, while commercial loans grew 9%, overall loans fell 2%, to $64.3 billion, due to a 12% drop in the consumer portfolio to $16.6 billion.

"Those are big numbers," said R. Jay Tejera, an analyst with Dain Rauscher in Minneapolis. "Their fundamentals were still pretty sluggish."

The loan decline can be attributed in part to Wells' exit from the residential mortgage business, Mr. Bradshaw said.

Mellon Bank Corp.

Mellon's earnings per share of 81 cents exceeded analysts' estimates by a penny.

Fees accounted for 66% of total revenues in the quarter, which is high by industry standards.

"Probably the biggest risk with this company is a stock market risk rather than a credit risk," said James Schutz, an analyst with ABN Amro Inc., Chicago.

Excluding acquisitions of a benefits consultant, an asset management firm, and a brokerage over the past year, fee income grew 13% in the quarter, the company said.

Mutual fund income, up 33% to $120 million, was the largest contributor to noninterest income, followed by institutional trust, which grew 34% to $98 million.

Benefits consulting, a business Mellon entered through the acquisition of Buck Consultants Inc. in July 1997, added $54 million to earnings.

Net interest income rose 1%, $374 million. Operating expenses grew 26% to $738 million, mostly due to acquisitions.

"There are a lot of acquisitions there," said Mr. Schutz. "Once you net all that out, core expenses are going up about 4% a year. Once you see how a lot of their businesses are growing, that's pretty good."

Brett Chase, Olaf de Senerpont Domis, and Liz Moyer contributed to this article. +++

Wells Fargo & Co. San Francisco Dollar amounts in millions (except per share) Second Quarter 2Q98 2Q97 Net income $337.0 $228.0 Per share 3.87 2.47 ROA 1.45% 0.92% ROE 10.66% 6.88% Net interest margin 6.22% 5.93% Net interest income 1,154.0 1,150.0 Noninterest income 735.0 679.0 Noninterest expense 1,097.0 1,246.0 Loss provision 170.0 140.0 Net chargeoffs 165.0 212.0 Year to Date 1998 1997 Net income $652.0 $568.0 Per share 7.45 6.06 ROA 1.40% 1.12% ROE 10.37% 8.46% Net interest margin 6.12% 6.03% Net interest income 2,285.0 2,366.0 Noninterest income 1,460.0 1,319.0 Noninterest expense 2,189.0 2,363.0 Loss provision 350.0 245.0 Net chargeoffs 343.0 413.0 Balance Sheet 6/30/98 6/30/97 Assets $93,200.0 $100,180.0 Deposits 70,450.0 73,748.0 Loans 62,485.0 63,839.0 Reserve/nonp. loans 354.93% 302.29% Nonperf. loans/loans 0.80% 0.90% Nonperf. assets/assets 0.69% 0.81% Nonperf. assets/loans + OREO 1.00% 1.23% Leverage cap. ratio 7.55% 6.67% Tier 1 cap. ratio 8.10% 7.49% Tier 1+2 cap. ratio 11.95% 11.45%

Mellon Bank Corp. Pittsburgh Dollar amounts in millions (except per share) Second Quarter 2Q98 2Q97 Net income $215.0 $190.0 Per share 0.81 0.71 ROA 1.79% 1.79% ROE 20.80% 21.90% Net interest margin 3.97% 4.29% Net interest income 374.0 371.0 Noninterest income 713.0 540.0 Noninterest expense 738.0 587.0 Loss provision 15.0 25.0 Net chargeoffs 13.0 32.0 Year to Date 1998 1997 Net income $430.0 $381.0 Per share 1.59 1.40 ROA 1.84% 1.81% ROE 21.20% 21.50% Net interest margin 4.02% 4.33% Net interest income 741.0 744.0 Noninterest income 1,411.0 1,076.0 Noninterest expense 1,454.0 1,169.0 Loss provision 30.0 50.0 Net chargeoffs 31.0 64.0 Balance Sheet 6/30/98 6/30/97 Assets $47,448.0 $43,712.0 Deposits 30,497.0 31,326.0 Loans 30,654.0 28,144.0 Reserve/nonp. loans 465% 568% Nonperf. loans/loans 0.35% 0.32% Nonperf. assets/assets 0.36% 0.37% Nonperf. assets/loans + OREO 0.55% 0.57% Leverage cap. ratio 6.70% 8.20% Tier 1 cap. ratio 6.50% 7.94% Tier 1+2 cap. ratio 10.80% 13.24%

Citicorp New York Dollar amounts in millions (except per share) Second Quarter 2Q98 2Q97 Net income $1,097.0 $1,024.0 Per share 2.30 2.10 ROA 1.35% 1.40% ROCE 21.50% 21.00% Net interest margin 5.02% 5.00% Net interest income 3,917.0 3,454.0 Noninterest income 3,207.0 2,448.0 Noninterest expense 3,883.0 3,173.0 Loss provision 564.0 512.0 Net chargeoffs 539.0 487.0 Year to Date 1998 1997 Net income $2,162.0 $2,019.0 Per share 4.53 4.11 ROA 1.36% 1.41% ROCE 21.60% 20.90% Net interest margin NA NA Net interest income 7,413.0 6,903.0 Noninterest income 5,973.0 4,840.0 Noninterest expense 7,277.0 6,342.0 Loss provision 1,071.0 935.0 Net chargeoffs 1,021.0 885.0 Balance Sheet 6/30/98 6/30/97 Assets $330,751.0 $304,293.0 Deposits 215,982.0 198,690.0 Loans 192,266.0 178,914.0 Reserve/nonp. loans 198.60% 195.80% Nonperf. loans/loans 1.60% 1.70% Nonperf. assets/assets 1.10% 1.30% Nonperf. assets/loans + OREO 1.90% 2.20% Leverage cap. ratio NA 7.30% Tier 1 cap. ratio 8.30% 8.20% Tier 1+2 cap. ratio 12.10% 12.00%

Chase Manhattan Corp. New York Dollar amounts in millions (except per share) Second Quarter 2Q98 2Q97 Net income $1,074.0 $925.0 Per share 1.20 1.00 ROA 1.15% 1.06% ROE 20.10% 19.20% Net interest margin 2.74% 2.84% Net interest income 2,036.0 2,006.0 Noninterest income 2,729.0 2,147.0 Noninterest expense 2,722.0 2,484.0 Loss provision 338.0 189.0 Net chargeoffs 338.0 189.0 Year to Date 1998 1997 Net income $1,799.0 $1,852.0 Per share 2.00 1.99 ROA 0.97% 1.09% ROE 17.00% 19.20% Net interest margin 2.83% 2.98% Net interest income 4,200.0 4,074.0 Noninterest income 5,200.0 4,229.0 Noninterest expense 5,863.0 4,931.0 Loss provision 682.0 409.0 Net chargeoffs 682.0 409.0 Balance Sheet 6/30/98 6/30/97 Assets $366,995.0 $352,033.0 Deposits 207,091.0 183,744.0 Loans 165,076.0 156,511.0 Reserve/nonp. loans 297.00% 355.60% Nonperf. loans/loans 0.72% 0.61% Nonperf. assets/assets 0.37% 0.31% Nonperf. assets/loans + OREO 0.81% 0.69% Leverage cap. ratio 6.30% 6.60% Tier 1 cap. ratio 8.20%(a) 7.80% Tier 1+2 cap. ratio 11.90%(a) 11.40%

(a) estimate

Banc One Corp.

Columbus, Ohio Dollar amounts in millions (except per share) Second Quarter 2Q98 2Q97 Net income $487.3 $48.7 Per share 0.68 0.06 ROA 1.58% 0.16% ROE 17.20% 1.62% Net interest margin 6.33% 6.11% Net interest income 1,428.9 1,454.3 Noninterest income 1,280.8 874.8 Noninterest expense 1,808.4 1,806.5 Loss provision 193.8 410.5 Net chargeoffs 235.8 302.5 Year to Date 1998 1997 Net income $1,035.7 $459.6 Per share 1.45 0.65 ROA 1.69% 0.77% ROE 18.75% 8.72% Net interest margin 6.38% 6.14% Net interest income 2,847.2 2,912.3 Noninterest income 2,463.0 1,720.5 Noninterest expense 3,388.8 3,197.6 Loss provision 406.1 695.7 Net chargeoffs 471.9 563.0 Balance Sheet 6/30/98 6/30/97 Assets $124,018.9 $124,810.0 Deposits 84,953.9 84,640.9 Loans 86,118.9 89,665.8 Reserve/nonp. loans 254.17% 336.95% Nonperf. loans/loans 0.60% 0.47% Nonperf. assets/assets 0.50% 0.39% Nonperf. assets/loans + OREO 0.70% 0.53% Leverage cap. ratio 8.54% 7.66% Tier 1 cap. ratio 9.03% 8.37% Tier 1+2 cap. ratio 13.47% 12.84% ===

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