Barnett Banks Inc. said Wednesday that its net income rose 15% in the first quarter, to $148.2 million. It said the increase was driven by strong consumer finance revenues, stable deposit costs, and an improving net interest margin.
Earnings per share of $1.49 came right in line with expectations, although a $19 million, 12 cents-a-share securities gain had not been factored into the analyst consensus estimate of $1.37 a share. The gain came from the sale of Barnett's holdings of stock in Atlanta-based Bank South Corp., which was acquired earlier this year by NationsBank Corp.
Analysts applauded Barnett's robust growth in fee income - which excluding that one-time gain was still up 21% from a year-earlier - and its strengthening net interest margin. The latter figure rose 22 basis points from yearend to 5.27%
"I venture to say that a 5.27% margin will turn out to be the highest among the larger banks this quarter," said John Coffey, with Robinson- Humphrey Co. "It really reflects the market they're in (deposit-rich Florida) and their business mix."
Charles W. "Chuck" Newman, Barnett's chief financial officer, attributed the strong margin to a slight decline in deposit costs during the quarter, combined with the company's policy of letting mortgages run off in favor of higher-yielding consumer and commercial loans.
Much of the gain in noninterest income came from Equicredit Corp., the consumer finance subsidiary Barnett acquired last year. Mr. Newman said Equicredit contributed $31 million of revenue in the first quarter, compared to the $18 million generated in the year-earlier period.
Barnett's earnings gains occurred against the backdrop of continued high levels of investment spending. Noninterest expense rose 12%, to $407.6 million.
"Because they have solid revenue growth, they're able to continue to invest in product development and technology," said Catherine L. Murray, with J.P. Morgan Securities Inc. "That's a good sign because it bodes well for their ability to generate future earnings."
Higher credit card delinquencies, however, contributed to a 70% surge in net chargeoffs, to $41.4 million, which forced Barnett to increase its loan-loss provision by a commensurate amount.
Meanwhile, a reviving automobile finance business helped Falls Church- based First Virginia Banks Inc. to boost its earnings by 4% to $28.4 million. First Virginia, which has $8.2 billion of assets and is best known for its indirect auto lending business, cited a 40% surge in auto loan production during the period. +++
Barnett Banks Inc. Jacksonville Dollar amounts in millions (except per share) First Quarter 1Q96 1Q95 Net income $148.2 $128.7 Per share 1.49 1.23 ROA 1.44% 1.26% ROE 18.16% 16.51% Net interest margin 5.27% 4.77% Net interest income 475.2 430.5 Noninterest income 215.6 162.8 Noninterest expense 407.6 363.5 Loss provision 41.6 24.3 Net chargeoffs 41.4 24.4 Balance Sheet 3/31/96 3/31/95 Assets $41,519.0 $41,735.0 Deposits 33,930.0 34,337.0 Loans 30,378.0 29,263.0 Reserve/nonp. loans 279% 227% Nonperf. loans/loans 0.60% 0.76% Nonperf. assets/assets 0.59% 0.71% Nonperf. assets/loans + OREO 0.80% 1.01% Leverage cap. ratio 6.31% 6.25% Tier 1 cap. ratio NA NA Tier 1+2 cap. ratio NA NA ===