Bank of America Corp.'s results offered up the best example yet of just how mixed a profit picture major banks faced in the second quarter.

The bank posted an 8% increase in profits to $2 billion and matched Wall Street estimates with earnings per share of $1.23. But the gains over a year ago were almost completely attributable to a charge in 1999's second quarter; and the estimate that B of A matched had been reduced in the days just prior to the profit announcement.

Among other banks reporting earnings on Monday, FleetBoston Financial Corp., Bank of New York, and Firstar Corp. produced strong profits while National City Corp.'s earnings declined in line with analysts' expectations.

Credit quality, which Wall Street analysts had predicted might be a problem for Bank of America, actually turned out to be slightly worse than expected. Nonperforming assets rose by 12% from the first quarter. The company's investment banking business also showed signs of the strain of a tumultuous period for both debt and equity markets.

Still, executives from the Charlotte, N.C.-based company were able to point to healthy loan growth and cost savings and they added that more savings are coming. James H. Hance, vice chairman and chief financial officer, said Bank of America would squeeze additional efficiencies out of its existing organization rather than by expanding.

Mr. Hance also said the bank plans to take more loans off its balance sheet through securitization - a practice that has attracted criticism of the company in the past because some investors view earnings from these sales as being of lower quality than traditional banking.

"We have let the balance sheet go because we have the capital," said Mr. Hance. "That said, it cannot grow indefinitely."

Mr. Hance said on a conference call Monday that said he expects further "fairly sizable" job cuts as the company completes the integration of the former NationsBank Corp. and BankAmerica Corp., though he declined to elaborate.

He said borrowers on three large loans, along with a handful of middle market credits spread throughout the transportation, health care, and entertainment industries, contributed to the increase. In addition, he said, a $54 million credit facility that failed because of fraud helped bring up Bank of America's net chargeoffs to $470 million.

Credit quality at the company is "ultimately manageable, but it was worse than most were expecting," said James F. Mitchell, an analyst at Putnam Lovell Securities.

Loans to consumers are increasing at a 19% annualized rate from the second quarter last year. Income from consumer and commercial banking rose 5%, to $1.25 billion. Global corporate and investment banking - dampened by reduced trading activity, fewer underwriting deals, and lower income from venture capital - declined 7%, to $600 million.

Fee revenues were flat compared to the year ago quarter.

Non interest expense declined 1% to $4.41 billion, due to reduced compensation costs since the NationsBank merger. Though Bank of America appears to be leaving behind some of its initial merger related concerns with this earnings period, one analyst questioned whether the bank is moving at the pace it needs to in its core traditional banking areas.

"When you take out investment securities and loan sales, it has quite modest revenue growth; we estimate underlying growth is about 3%," said Lawrence Cohn, an analyst at Ryan, Beck & Co.

Shares of Bank of America fell 12.5 cents, to close at $47.375.

FLEETBOSTON FINANCIAL CORP.

FleetBoston Financial Corp. said profits rose 21%, to $847 million.

The results included $75 million in after-tax gains related to the company's sale of $3.6 billion of loans and $4 billion of deposits, mostly to Sovereign Bancorp in Wyomissing, Pa. Excluding the one-time items, earnings per share of 83 cents beat the consensus by a penny.

Loans rose about 4% from the first quarter, to $112.5 billion. Non-performing assets rose 7% from the first quarter, to $950 million. Eugene McQuade, chief financial officer, said the company expects loan growth to pick up during the remaining months of the year. "Much of the focus [during the first six months of 2000] was on integrating the businesses," he said in an interview.

The $181.3 billion-asset company said income from commercial and retail banking in its core Northeastern markets rose 28%, to $328 million, on cost savings from merger integration and higher loan volume.

Income from global banking and financial services, which includes the company's asset management, brokerage, commercial banking, capital markets, and international operations, rose 44%, to $460 million.

Fleet said it completed two-thirds of the branch and deposit divestitures it planned as part of the merger of Fleet Financial Group and BankBoston Corp. The additional divestitures are scheduled to take place in the third quarter. Mr. McQuade said the company expects to have a similar-sized gain in with the completion of the final phase of divestitures.

Shares of Fleet fell $2.25, to close at $35.50.

BANK OF NEW YORK CORP.

Bank of New York Co. said profits rose 10%, to $356 million, or 48 cents a share, on higher fees from securities processing and private client services, beating expectations by a penny.

The $76 billion-asset banking company said its second quarter results were boosted by high trading volumes and additional revenues from newly acquired businesses.

Fee income rose 20%, to $780 million, and made up 63% of total revenues. Fees from securities processing rose 33%, to $403 million. Fees from private client activities and asset management rose 21%, to $72 million. Fees from foreign exchange and other trading activities surged 54.3%, to $71 million.

Assets under custody reached $6.8 trillion. Expenses rose 22.4%, to $628 million. The company attributed the gain to investments in technology and acquisitions. Shares of Bank of New York rose $1.46875, to close at $48.40625.

FIRSTAR CORP.

Firstar Corp. said net income rose 8.7%, to $316 million. Excluding $66.9 million in merger-related charges, earnings per share of 37 cents met Wall Street estimates.

The $74.4 billion-asset Milwaukee banking company said $57.1 million of pretax merger charges during the quarter relate to its acquisition of St. Louis-based Mercantile Bancorp, which was completed last year. The remaining $9.8 million relate to its 1998 merger with Cincinnati-based Star Banc Corp.

Jerry A. Grundhofer, chairman and chief executive officer, said the company's credit quality "continues to be outstanding" and said chargeoffs and nonperforming assets remained low.

Non-interest income rose 5.3%, to $371.6 million. Expenses, excluding merger charges, dropped 12.8%, to $441.2 million, compared to the same period last year. Shares of Firstar fell 50 cents, to close at $21.4375.

NATIONAL CITY CORP.

National City Corp. reported a 3.4% decline in profits, to $342.3 million, mainly because of a previously announced balance sheet restructuring to shelter itself from the effects of rising interest rates.

In June, the $84.6 billion-asset Cleveland banking company announced the sale of $2 billion in student loans for a pre-tax gain of $74.2 million. The company also said it took on $58.4 million in pre-tax losses when it sold $4 billion in low-yield, fixed-rate securities.

Excluding those items, earnings per share of 54 cents were in line with analysts' expectations.

"Most directly affecting our reported results were the balance sheet enrichment strategies initiated in the second quarter, which have reduced on reliance on purchased funding, improved our capital positions and reduced our liability sensitivity," said National City chairman and chief executive officer David A. Daberko.

Net chargeoffs totaled $68.7 million, up 4% from the first quarter and 14.7% from the second quarter of last year. The company said its loan demand was strong in the second quarter totaling $62.5 billion in average loans. That grew $2 billion over the first quarter, excluding the sale of the student loans and adjustable-rate mortgages. Shares of National City fell 28.125 cents, to close at $18.21875.

For more earnings data, go to the Ranking the Banks section of Americanbanker.com.

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