Hibernia Corp.'s stock dropped 2.8% Monday after the New Orleans-based banking company reported a worsening of its bad-loan problems.
Earlier this year Hibernia warned investors that its non-performing- asset difficulties would accelerate before getting better, but Monday's news still discouraged many investors.
Nonperforming loans rose to $100.5 million, or 0.96% of assets, in the second quarter, from $76.3 million (0.75%) in the first quarter and $38 million (0.42%) in the second quarter of 1998.
The woes pushed Hibernia's stock price to $15.375, down from $15.8125 at Friday's close.
"Credit quality is deteriorating," said Lori Appelbaum, a bank analyst at Goldman, Sachs & Co. "That makes people nervous."
The bank did not try to put a cheery face on the news, though it said a turnaround is in process. "None of us would be described as pleased with the current level of our performance," Hibernia's chief executive officer, Stephen Hansel, said in a conference call.
Overall, Hibernia earned $47.4 million, or 29 cents a share, in the second quarter. That was up 7%, from $44.3 million, or 27 cents a share, a year earlier.
The bank said net interest margin fell to 4.39%, from 4.61% a year earlier. "We aren't as happy as we want to be on margins," Mr. Hansel said. "But I will be surprised if there is no progress, especially with the rise in the prime rate."
As for the loan problems, Hibernia's two biggest exposures are a $33 million unsecured loan to United Companies Financial Corp., a subprime lender, and a $29 million loan to Forcenergy Inc., an oil company. Both companies have filed for bankruptcy.
Though the Forcenergy loan is over 90 days past due, Hibernia does not classify it as nonperforming. "We expect to be paid 100% of the principal and interest," Mr. Hansel said. "And we expect that will happen soon." Hibernia charged off a portion of the United Cos. loan, he said.
He declined to specify any of Hibernia's other problem loans. However, he did say, "we feel strongly the loss content in the newer nonperforming loans is lower than those that have come in the last few months."
Jacqueline Reeves at Putnam, Lovell, de Guardiola & Thornton said the jury is still out as to whether Hibernia will overcome its credit quality problems. "Perhaps their credit underwriting standards have to become more strict," she said. But bank management has been quick to address its problems, she said.