Citicorp, the nation's largest bank, posted a 36% jump in first-quarter earnings, to $829 million, reflecting improved asset quality and a surge in trading revenues.
Chemical Banking Corp. also reported a substantial gain in earnings - 21%, to $385 million. But Bankers Trust New York Corp. suffered a $157 million loss, which had been expected.
Analysts expressed mixed reactions to Citicorp's improvement, noting that much of it came from special items, such as $59 million in pretax gains from the sale of non-U.S. real estate assets and $26 million from the restructuring of loans to Ecuador.
Citi's trading revenues, in contrast to declines at other banks, rose to $344 million from $71 million. Meanwhile, provisions for credit losses dropped to $391 million - a level that analysts believe is $60 million to $80 million below normal.
Stripping out nonrecurring items, Citicorp's earnings would have been about 20 cents a share lower than the $1.53 reported, estimated Lawrence Cohn, a banking analyst with PaineWebber Inc.
Other analysts expressed a similar view, stressing that without extraordinary items, trading, and lower provisions, Citicorp's improvement is less than it appears.
"Citicorp's growth in underlying revenues was only 4%, which is pretty discouraging," said David Berry of Keefe, Bruyette & Woods Inc.
"The bottom line is, they did come in better than expected because of trading, but the underlying issue continues to be core revenue growth, which is good outside the U.S. but weak domestically," said Raphael Soifer of Brown Brothers Harriman & Co.
At Bankers Trust, trading-related net interest revenues fell to $1 million from $177 million, and trading losses reached $78 million, compared with a positive $14 million last year.
Fees and commissions fell $20 million, to $145 million; fund management fees fell 9%, to $171 million; and other noninterest revenues fell 13%, to $102 million. Meanwhile, expenses rose 15%, to $734 million.
Bankers Trust was badly battered earlier this year by trading losses, mainly on Latin American securities. The bank said it would sustain an after-tax loss of $122 million for the first quarter, in addition to a $35 million after-tax provision for severance-related costs in connection with the company's expense reduction program.
The bank was also set back by $10 million in fines from regulators on derivatives transactions. Bankers Trust placed about $350 million in receivables from leveraged derivatives accounts on nonperforming status after two companies, Gibson Greetings and Procter & Gamble, filed lawsuits against the bank.
At Chemical, meanwhile, earnings were boosted by a $51 million after-tax gain from the March sale of a 12.5% stake in the Manila-based Far East Bank and Trust. But trading revenues showed a steep drop to $56 million from $185 million last year.
Other noninterest items, such as fees and commissions, held steady, excluding a $18 million loss on securities holdings.
Chemical's interest income was up 27.5%, to $2.67 billion, and the bank received higher-than-normal gains from equity investments.
Earnings are likely to further improve this year when the bank completes the sale of its southern New Jersey banking franchise to PNC Bank Corp. for $504 million.
Analysts noted that Chemical continued to build reserves by adding $120 million in provisions for loan losses, while noninterest expenses, a key component of operating costs, fell nearly 6% to $1.24 billion.
"It wasn't an all out barn-burning quarter (for Chemical), but it wasn't awful either," PaineWebber's Mr. Cohn observed. +++ Citicorp New York Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $829.0 $553.0 Per share 1.53 1.01 ROA 1.25% 0.95% ROE 18.8% 16.7% Net interest margin 4.61% 4.52% Net interest income 2,325 2,085 Noninterest income 2,118 1,776 Noninterest expense 2,693 2,447 Loss provision 391 415 Net chargeoffs 293 315 Balance Sheet 1/95 12/94 Assets $269,013 $250,489 Deposits 165,112 155,726 Loans 156,374 152,420 Reserve/nonp. loans 111.3% 61.2% Nonperf. loans/loans 3.0% 4.8% Nonperf. assets/assets 2.4% 4.0% Nonperf. assets/loans +OREO 4.1% 6.5% Leverage cap. ratio 6.9% 5.8% Tier 1 cap. ratio 8.0%* 6.86% Tier 1+2 cap. ratio 12.0%* 11.55% *Estimated Chemical Banking Corp. New York Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $385.0 $319.0 Per share 1.46 1.13 ROA 0.89% 0.79% ROE 15.50% 12.24% Net interest margin 3.48% 3.59% Net interest income 1,156.0 1,143.0 Noninterest income 870.0 931.0 Noninterest expense 1,246.0 1,324.0 Loss provision 120.0 205.0 Net chargeoffs 145.0 236.0 Balance Sheet 1/95 12/94 Assets $185,281.0 $166,037.0 Deposits 95,421.0 95,121.0 Loans 80,369.0 74,661.0 Reserve/nonp. loans 229.65% 126.26% Nonperf. loans/loans 1.33% 3.17% Nonperf. assets/assets 0.61% 1.93% Nonperf. assets/loans + OREO
NA NA Leverage cap. ratio 5.80% 6.20% Tier 1 cap. ratio 8.00%* 8.30% Tier 1+2 cap. ratio 12.00%* 12.50% *Estimated ===