Banc One, Wells Also Post Gains

Four of the nation's biggest banks reported stronger third-quarter earnings on Tuesday, largely reflecting cleaner balance sheets, but posted mixed results on revenue growth.

Better-than-expected credit quality helped Citicorp earn $528 million, up 355% from its dismal performance in the year-earlier quarter.

Rival Chemical Banking Corp. reported a 78% rise as profits totaled $502 million, giving the bank a stellar 1.39% return on average assets.

Columbus, Ohio-based Banc One Corp. reported net income of $284.9 million, up 16%. Executives cited lower credit costs and growth in consumer lending and fee income.

A Sour Note

Wells Fargo & Co.'s profits of $165 million were almost seven times higher than its anemic results a year earlier. But on a sour note, the bank said total revenues slipped.

News of the earnings brought a mixed reaction in the stockmarket. Citicorp closed at $35.75, up 12.5 cents; Chemical dropped $1.875, to $40.875; Banc One was down 25 cents, to $40; and Wells Fargo gained $2.125, to $118.75.


The nation's largest bank company earned 97 cents a share, far exceeding analysts' expectations of 78 cents, according to Zacks Investment Research Inc. in Chicago.

Credit costs declined dramatically with commercial cash-basis loans and foreclosed real estate dropping by $976 million from the end of the second quarter, to $6.3 billion.

Citicorp's North American commercial real estate portfolio registered the biggest improvement, with cash-basis loans and foreclosed real estate falling $614 million, to $4.7 billion in the third.

"Credit quality was surprisingly terrific," said Diane B. Glossman, an analyst at Salomon Brothers Inc. in New York.

Citicorp executives called the drop in troubled real estate assets a vindication of their strategy. While many of its competitors sold off their portfolios in bulk - often at depressed prices - Citicorp chose to actively manage its portfolio, restructuring some of the credits while selling others in a retail fashion.

"We said liquidity would come back to the real estate market and it has," said Citicorp vice chairman William R. Rhodes in an interview. "We've seen a tremendous improvement in our nonperforming assets."

Credit quality also improved on the consumer side, where net writeoffs, adjusted for the effect of credit card securitization, totaled $665 million in the quarter, down from $708 million in the second quarter.

Operating expenses increased 6% from a year earlier and 3% from the second quarter. The company attributed the rise to expansion in developing countries in developing countries and higher compensation due to strong trading results.

"The only disappointment was expenses, but how much can you complain when revenues are up?" Ms. Glossman said.CiticorpNew York-- dollar amounts in millions (except per share) --Third Quarter 3Q93 3Q92Net income $528.0 $116.0Per share 0.97 0.17ROA 0.91% 0.20%ROE 19.20% 3.20%Net interest margin 3.97% 3.82%Net interest income 1,986.0 1,953.0Noninterest income 2,087.0 1,857.0Noninterest expense 2,574.0 2,517.0Loss provision 625.0 927.0Net chargeoffs 451.0 839.0Year to Date 1993 1992Net income $1,644.0 $442.0Per share 3.05 0.78ROA 0.92% 0.26%ROE 20.30% 500%Net interest margin 3.86% 3.76%Net interest income 5,693.00 5,611.0Noninterest income 6,240.0 6,017.0Noninterest expense 7,594.0 7,504.0Loss provision 151.0 113.0Net chargeoffs 1,624.0 2,798.0Balance Sheet 9/30/93 9/30/92Assets $221,307.0 $222,882.0Deposits 148,546.0 151,770.0Loans 139,617.0 147,995.0Reserve/nonp. loans NA 39.00%Nonperf. loans/loans NA 6.40%Nonperf asset/asset NA 6.40%Leverage cap ratio 5,95% 4.28%Tier 1 cap. ratio 6.00% 4.25%Tier 1+2 cap. ratio 10.50% 8.50%


The results included one-time charges related to merger expenses and a gain related to tax benefits. The items accounted for $73 million of the earnings from the nation's third-largest bank.

The $115 million charges is related to additional expenses for facilities and costs associated with the bank's headquarters building and branch consolidation.

Chemical offset the charge by recognizing remaining tax benefits that it earned from adopting a new accounting rule earlier this year. This added $140 million to the $74 million that the bank had previously decided to recognize for the quarter.

The earnings translated into $1.84 a share, which greatly exceeded the analysts' consensus estimate of $1.15 compiled by Zacks Investment Research.

Chemical said last month that earnings would beat the high end of Wall Street's per-share estimates because the company had a strong quarter in trading and other core businesses.

Profits from all trading activities totaled $268 million, $30 million lower than the previous quarter but up 19% from the same period last year.

Analysts said that, excluding one-time items, Chemical had a strong quarter. But they expressed concern over the expense-related charge and said they needed more information about the tax related gain.

"I wonder what this says about their merger planning, and it's not clear what the taxes mean," said Raphael Soipher, an analyst at Brown Brothers Harriman & Co. "They also had a number of other extraordinary items, like securities gains and venture capital gains."Chemical Banking Corp.New York-- Dollar amounts in millions (except per share) --Third Quarter 3Q93 3Q92Net income $502 $282Per share 1.84 0.98ROA 1.39% 0.80%ROE 20.90% 2.49%Net interest margin 3.68% 3.84%Net interest income 1,163 1,158Noninterest income 1,004 767Noninterest expense 1,370 1,258Loss provision 298 330Net chargeoffs 325 436Year to Date 1993 1992Net income $1,257 $782Per share 4.55 2.81ROA 1,17% 0.75%ROE 17.86% 12.03%Net interest margin 3.75% 3.75%Net interest income 3,487 3,372Noninterest income 2,971 2,309Noninterest expense 3,958 3,636Loss provision 973 1,050Net chargeoffs 1,049 1,210Balance Sheet 9/30/93 9/30/92Assets $149,408 $138,833Deposits 95,468 89,759Loans 77,779 82,078Reserve/nonp. loans 97.57% 61.47%Nonperf. loans/loans 3.92% 6.17%Nonperf asset/asset 2.77% 4.74%Leverage cap ratio 6.90% 6.50%Tier 1 cap. ratio 7.90% 7.20%Tier 1+2 cap. ratio 12.00% 11.50%


The nation's No. 8 bank said loan growth and shrinking problem assets boosted profitability from year-ago results, which were restated to reflect pooling of five major acquisitions.

A loss provision of $97.5 million fell 24% from a year ago as Banc One slashed its concentration of problem assets to a slender 0.86% of total assets, down 12 basis points from the second quarter and down 43 basis points from a year ago.

Loan growth continued to be a performance highlight. Average total loans of $49 billion were up 2.56% from the second quarter and 9.67% from a year ago.

Household credits drove the portfolio expansion. On a year-to-year basis, home mortgages rose 14.1%, consumer installment loans rose 20.5%, and credit card outstanding rose 15.6% Average commercial loans fell by 2.34% to $13.17 billion.

Loan processing and service income rose by $8 million, or 7.3%, fueling a 2.5% year-to-year increase in noninterest income.

Boosted by extensive use of financial derivatives, mostly interest rate swaps, Banc One's net interest margin was 6.22 percentage points, one of the highest in the banking industry. That was down 8 basis points from the second quarter but up 21 basis points from restated results of last year.Banc OneColumbus, Ohio-- Dollar amounts in millions (except per share) --Third Quarter 3Q93 3Q92Net income $284.9 $245.7Per share 0.82 0.70ROA 1.52% 1.35%ROE 17.43% 16.71%Net interest margin 6.22% 6.01%Net interest income 1,031.6 975.7Noninterest income 380.3 371.0Noninterest expense 863.1 847.7Loss provision 97.5 128.0Net chargeoffs 101.8 146.9Year to Date 1993 1992Net income $853.7 $671.0Per share 2.46 1.93ROA 1.54% 1.24%ROE 18.08% 15.75%Net interest margin 6.36% 6.02%Net interest income 3,121.3 2,904.2Noninterest income 1,094.8 1,075.2Noninterest expense 2,627.0 2,451.7Loss provision 261.5 475.7Net chargeoffs 257.1 440.0Balance Sheet 9/30/93 9/30/92Assets 76,461.6 73,847.7Deposits 59,143.7 59,075.9Loans 50,907.8 46,286.1Reserve/nonp. loans 219,16% 168.70%Nonperf. loans/loans 0.82% 1.17%Nonperf. asset/asset 0.86% 1.29%Leverage cap. ratio 8.63% NATier 1 cap. ratio 10.72% NATier 1+2 cap. ratio 14.59% NA


The San Francisco-based company's strong rebound in earnings and credit quality was tempered by a third-quarter drop in revenue. At the same time, the bank said it is shifting to a more aggressive strategy.

For the first nine months of 1993, the company earned $422 million, compared with $225 million for the same period in 1992.

Wells' sharp gain (ahead of analysts' expectations) reflected a big drop in its provision for loan losses, despite the economic slump in California. The company added $120 million to loan-loss reserves, which just about equaled net loan chargeoffs for the period. Wells' provision was $140 million in the 1993 second quarter and $400 million a year ago.

Meanwhile, Wells' problem assets continued their sharp descent. Nonperforming assets, mainly commercial real estate, totaled $2.074 billion on Sept. 30, down 10.6% from the end of June and 30.7% from September 1992. The company reported total assets of $51.6 billion.

Wells' profits were also boosted by a decrease in income tax expenses of about $18 million. The gain reflected the recent rise in federal corporate tax rates, permitting a higher valuation of deferred tax benefits.

With credit on the mend, Well's chairman and chief executive Carl E. Reichardt said in a statement that the company was shifting focus from management of loan problems to a "renewed emphasis on lending."

The change responds to the company's decline in revenue. Wells' pre-provision net interest income dropped about 2% from the 1992 third quarter. Wells' net interest margin - a wide 5.65% - was steady. But outstanding loans were off 13.4% from year-ago levels.Wells Fargo & Co.San Francisco-- Dollar amounts in millions (except per share) --Third Quarter 3Q93 3Q92Net income $165.0 $24.0Per share 2.74 0.21ROA 1.29% 0.18%ROE 17.75% 1.50%Net interest margin 5.65% 5.69%Net interest income 656 670Noninterest income 264 285Noninterest expense 535 508Loss provision 120 400Net chargeoffs 121 264Year to Date 1993 1992Net income $422 $225Per share 6.92 3.62ROA 1.11% 0.57%ROE 15.61% 8.66%Net interest margin 5.76% 5.69%Net interest income 1,993 2,021Noninterest income 798 801Noninterest expense 1,605 1,508Loss provision 470 915Net chargeoffs 414 598Balance Sheet 9/30/93 9/30/92Assets $51,579 $52,278Deposits 40,865 42,156Loans 33,606 38,810Reserve/nonp. loans 125% 82%Nonperf. loans/loans 5.1% 6.2%Nonperf. asset/asset 4.0% 5.7%Leverage cap. ratio 7.20% 6.05%Tier 1 cap. ratio 9.90% 7.42%Tier 1+2 cap. ratio 14.60% 12.34%


The Princeton, N.J.-based company took a one-time restructuring charge that drove earnings down 27.6% to $11.8 million in the third quarter.

The $21.5 million charge is related to a previously announced reorganization.

Excluding the effects of the charge, earnings would have been $54.5 million, or more than triple the $16.3 million the bank earned a year ago.


Salt Lake City-based First Security earned $28.2 million in the third quarter, up 17% from a year ago. Net income equaled a return on assets of 1.40% for the period.

The results reflected across-the-board gains in credit quality and revenue, as the company benefited from the vibrant economy in the Rocky Mountain region. The company cited growth in consumer loans and mortgages as a key element in its performance.

Fueled by acquisitions and internally generated growth. First Security's assets jumped to $8.5 billion at the end of September, up 13.5% from a year earlier.


The San Francisco bank reported net income of $21.6 million, down 27% from a year ago.

Unlike its major California competitors, Union, the state's fourth-largest bank, has not yet turned the corner on its credit problems.

Though down from year-ago levels, nonperforming assets rose 4.6% in the third quarter to $791 million. The bank's third-quarter loan-loss provision was $36 million, up 20% from the previous quarter and 9.1% from the 1992 third quarter.

Nonperforming assets equaled 4.88% of Union's total assets of $16.2 billion on Sept. 30. Bank of Tokyo holds about a 70% of Union's common stock.


H.F. Ahmanson & Co., the nation's largest thrift with $50.1 billion in assets, reported earnings of $70 million, up 38% from last year's third quarter. The gain was attributed primarily to a reduction in Ahmanson's provision for loan losses.

Not all the news from the California thrift industry was good.

Great Western Financial Corp. reported a third-quarter loss of $17.5 million after making a $100 million provision for disposition of distressed real estate. The thrift, which earned $31.7 million a year earlier, said it expected to make a bulk sale of problem assets in the fourth quarter.

On Monday, Golden West Financial Corp. said earnings dropped 8.6% to $63.8 million. The company blamed the weakened profitability on an accounting change, a charge for higher taxes, and an increase of about $6.7 million in the loan-loss provision.

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