Citicorp and Chemical Banking Corp. led Tuesday's installment of improved bank earnings reports for the second quarter, but qualifications and skepticism began to creep in.

While Chemical registered an impressive 27% rise in net income, to $453 million, Citicorp had to content itself with a pretax increase of 25%, to $1.4 billion. Citicorp's after-tax net fell 3%, to $853 million, mainly due to the lack of tax benefits realized a year earlier.

Each company "reported a significant amount of nonrecurring items that may not be sustainable," said PaineWebber Inc. bank analyst Lawrence Cohn.

Elsewhere, earnings fell 7% at Banc One Corp. and rose 13% at Wells Fargo & Co., 13% at Mellon Bank Corp., and 16% at State Street Boston Corp. (See pages 5 and 6.)

Citicorp chairman John S. Reed expressed satisfaction with the company's results, saying they "show that we can deliver sustained performance in diverse economic environments around the world." He pointed to a 10% increase in global consumer revenue - total revenues were up 16%, to $4.9 billion - and "a strong recovery in our capital markets results from last year's depressed levels."

Venture capital gains rose sevenfold over the 1994 second-quarter level, to $188 million. Combined trading and foreign exchange-related revenues nearly doubled to $465 million. Net interest revenues also held up fairly strongly despite a general downturn in interest margins at many, rising 14% to $2.5 billion.

Citicorp's noninterest revenues, covering fees and commissions from trust, corporate finance, and trading, rose 17% to $2.22 billion. Expenses rose 12% to nearly $1.7 billion.

Said Mr. Cohn: "I'm somewhat skeptical about Citi's long-run capacity to really bear down on expenses. We're concerned about whether it's going to slide back into its old bad habit of letting expenses run ahead of revenues."

At Chemical, revenues from equity and equity-related investments nearly doubled, to $126 million from $66 million last year.

Trading revenues fell 18% to $171 million. Net interest revenues declined to $1.16 billion compared with $1.18 billion a year earlier. Noninterest revenues rose 11%, to $961 million, while expenses fell 3% to $1.25 billion.

"The bottom line is that Citicorp came in pretty much as expected and Chemical better than expected," said Raphael Soifer, a bank analyst with Brown Brothers Harriman.

Mr. Soifer and other analysts said it would be unfair to compare earnings at money-centers like Chemical and Citicorp to those at U.S. regionals.

"Citicorp is not a regional bank," Mr. Soifer remarked. "It is No. 1 in foreign exchange trading worldwide, has a large venture capital portfolio, and operates in other areas with fluctuating income."

"Arguably, the New York banks are the ones least linked to the U.S. economy because they are the most global, remarked Diane Glossman, an analyst with Salomon Brothers Inc.

Other eastern institutions, including the wholesale powerhouse State Street Boston Corp., reported strong earnings.

State Street's $62.7 million yielded a 15-cent rise in earnings per share, to 75 cents. Total revenues at the leading custodian and asset manager rose 11%, to $388 million, of which fee revenues accounted for $276.7 million.

Mellon Bank Corp. said its net income of $162 million produced earnings per share of $1.09, up 12%. Return on assets at the $39.4 billion-asset bank rose 6 basis points, to 1.75%.

In contrast to larger banks that have seen slides in net interest margins and revenues, Mellon improved in both measures. Net interest revenues were up 6%, to $385 million, and the margin expanded 6 basis points from a year earlier, to 4.69%.

One of Mellon's Pittsburgh-based competitors, Integra Financial Corp., sustained a $1.8 million, or 4%, decline in second-quarter earnings, to $40 million, or $1.21 a share.

The $14.8 billion-asset company cited higher noninterest expenses and a decline in net interest income, partially offset by increased noninterest income and a reduced loan-loss provision. Low provisions have helped many banks strengthen their bottom lines.

"While the net interest margin declined, measures were taken to reduce Integra's sensitivity to interest rate fluctuations," said chairman William F. Roemer. +++ Chemical Banking Corp. New York Dollar amounts in millions (except per share) Second Quarter 2Q95 2Q94 Net income $453.0 $357.0 Per share 1.72 1.27 ROA 1.01% 0.87% ROE 17.67% 13.90% Net interest margin 3.36% 3.69% Net interest income 1,162.0 1,185.0 Noninterest income 961.0 867.0 Noninterest expense 1,248.0 1,281.0 Loss provision 120.0 160.0 Net chargeoffs 145.0 476.0 Year to Date 1995 1994 Net income $838.0 $676.0 Per share 3.17 2.39 ROA 0.95% 0.83% ROE 16.61% 13.07% Net interest margin 3.42% 3.64% Net interest income 2,318.0 2,328.0 Noninterest income 1,831.0 1,798.0 Noninterest expense 2,494.0 2,605.0 Loss provision 240.0 365.0 Net chargeoffs 290.0 712.0 Balance Sheet 6/30/95 6/30//94 Assets $178,531.0 $168,921.0 Deposits 94,889.0 91,956.0 Loans 84,675.0 74,685.0 Reserve/nonp. loans 228.38% 152.22% Nonperf. loans/loans 1.26% 2.35% Nonperf. assets/assets 0.63% 1.48% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 5.80% 6.40% Tier 1 cap. ratio 8.0%* 8.7% Tier 1+2 cap. ratio 11.90%* 12.80% *estimated Citicorp New York Dollar amounts in millions (except per share) Second Quarter 2Q95 2Q94 Net income $853.0 $877.0 Per share 1.57 1.64 ROA 1.25% 1.36% ROE 18.1% 23.4% Net interest margin 4.80% 4.64% Net interest income 2,468.0 2,158.0 Noninterest income 2,221.0 1,892.0 Noninterest expense 2,798.0 2,456.0 Loss provision 493.0 472.0 Net chargeoffs 431.0 54.0 Year to Date 1995 1994 Net income $1,682.0 $1,430.0 Per share 3.09 2.66 ROA 1.25% 1.15% ROE 18.4% 19.9% Net interest margin 4.71% 4.58% Net interest income 4,793.0 4,243.0 Noninterest income 4,339.0 3,668.0 Noninterest expense 5,491.0 4,903.0 Loss provision 884.0 887.0 Net chargeoffs 724.0 369.0 Balance Sheet 6/30/95 6/30//94 Assets $256,994.0 $254,246.0 Deposits 163,122.0 152,292.0 Loans 156,187.0 141,092.0 Reserve/nonp. loans 122.1% 80.9% Nonperf. loans/loans 2.7% 4.3% Nonperf. assets/assets 2.4% 3.4% Nonperf. assets/loans + OREO 3.8% 6.0% Leverage cap. ratio 7.3% 6.2% Tier 1 cap. ratio 8.4% 7.1% Tier 1+2 cap. ratio 12.4% 11.6% Mellon Bank Pittsburgh Dollar amounts in millions (except per share) Second Quarter 2Q95 2Q94 Net income $162.0 $143.0 Per share 1.09 0.97 ROA 1.75% 1.69% ROE 17.47% 15.75% Net interest margin 4.69% 4.63% Net interest income 385.0 364.0 Noninterest income 406.0 420.0 Noninterest expense 500.0 508.0 Loss provision 20.0 20.0 Net chargeoffs 46.0 14.0 Year to Date 1995 1994 Net income $322.0 $284.0 Per share 2.17 1.93 ROA 1.76% 1.68% ROE 17.51% 15.93% Net interest margin 4.75% 4.66% Net interest income 774.0 731.0 Noninterest income 804.0 858.0 Noninterest expense 995.0 1,038.0 Loss provision 40.0 40.0 Net chargeoffs 72.0 31.0 Balance Sheet 6/30/95 6/30//94 Assets $40,016.0 $37,908.0 Deposits 26,807.0 26,208.0 Loans 27,765.0 24,731.0 Reserve/nonp. loans 293% 393% Nonperf. loans/loans 0.72% 0.63% Nonperf. assets/assets 0.69% 0.70% Nonperf. assets/loans + OREO 0.99% 1.06% Leverage cap. ratio 8.3% 9.54% Tier 1 cap. ratio 9.0% 10.27% Tier 1+2 cap. ratio 12.30% 13.74% ===

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