Special Report: Bank Earnings Chase Profit Falls as 2Q Reports Flow
Chase Manhattan Corp., which is under heavy pressure to boost its performance, reported an 8.5% drop in second-quarter earnings as core revenues declined. National Westminster Bancorp's earnings fell 17% for the quarter; UJB Financial Corp. reported a 41% rise.
Bankers Trust New York Corp. reported a 50% plunge in earnings for the quarter, renewing questions about whether the seventh-largest U.S. bank will ever regain its former prowess. Reflecting declines in both net interest income and trading revenue, earnings fell to $91 million, or 98 cents a share. Analysts had been expecting $1.17 a share.
Citicorp and Chemical Banking Corp. led an installment of improved bank earnings reports for the quarter, but qualifications and skepticism began to creep in.
Banc One Corp. reported a 7% decline in net income for the quarter. Likewise, Fourth Financial Corp. of Wichita, Kan., said its net had fallen 9% Meanwhile, Chicago's Northern Trust Corp. recorded a 9% gain in earnings. And two large Midwest thrifts also reported strong earnings gains.
BankAmerica Corp. boosted quarterly earnings in excess of Wall Street expectations, but a senior executive warned of signs of worsening credit quality. Great Western Financial Corp. reported a 10% drop in net income from last year; Washington Mutual Inc. reported a 7% increase; and Sumitomo Bank of California, as expected, reported a loss of $144.7 million.
Profit at Republic New York Corp. crashed to $11.1 million - a whopping 86% decline - after a $120 million charge for severance and other cost- cutting expenses. Earnings at Boston-based Shawmut National Corp. totaled $82.6 million, despite a $13.6 million charge.
18969 WASHINGTON Thrift Fund Facing Many Hurdles Still
By abandoning its hard line against helping the fund that insures thrift deposits, the American Bankers Association raised hopes that a cure for the fund's ills is within reach. But substantial disagreement remains as to just what a thrift fund rescue would entail.
The Senate Agriculture Committee refused to expand the list of those eligible to borrow from the Farm Credit System, but the agency is proposing to give itself the same thing by regulation.
A federal judge in Texas has accused the Federal Deposit Insurance Corp. of pursuing a fraud case against the chairman of Dallas' Bluebonnet Savings Bank for political reasons.
Bolstering the banking industry's case, a new survey found that the public prefers to get student loans from private-sector institutions than from the government.
Stung by charges of racial bias, banks and other lenders have dramatically increased their business with members of minority groups. Federal regulators reported that home mortgage lending to blacks jumped 54.7% last year, more than 2.5 times the volume of loans extended to blacks in 1990.
18873 REGIONAL BANKING Utah's 1st Security Eyes Independence
Salt Lake City-based First Security Corp. says it has begun a grueling companywide search for ways to cut costs, boost revenues, and improve service.
Adding a team of specialists to its rapidly growing U.S. investment banking unit, Canadian Imperial Bank of Commerce has hired an 18-member U.S. government securities team from S.G. Warburg.
Great Western Financial Corp. said it had hired A. William Schenck 3d from PNC Bank Corp. to head its consumer banking business.
18838 COMMUNITY BANKING Mass. Thrift Tests Regulatory Catch-22
Conversion-minded mutual institutions in Massachusetts are caught in a vise between state law and federal rules governing mutual-to-stock conversions. The conflict threatens to derail a state-chartered cooperative's conversion plan.
Community banks in the Northeast are reporting another quarter of strong earnings, but analysts are raising a red flag over tighter interest margins that could take a toll on bottom lines.
Although stable interest margins and loan growth generated solid second- quarter earnings for many Midwest community banks, margin erosion in the second half of the year could slow things down.
Embry National Bank in Georgia has caused a ruckus with its plan to use the controversial "30-mile rule" not to branch into another state, as in previous cases, but simply to get across the county line. "We are long overdue," said Jack Embry, chairman.
Jerold L. Harris, president and chief executive of the Farm Credit Bank in Wichita, Kan., gets hot under the collar when he hears bankers' complaints about his organization. He believes the farm credit banks are just aggressive enough to be a competitive force.
18599 COMPLIANCE Bankers Want Curb On Rescission Right
Richard L. Mount, president of the Independent Bankers Association of America, says borrowers have plenty of time to consider their options before a mortgage closes. So he agrees with bankers who would limit borrowers' so-called right of rescission on mortgages that have been closed.
The Federal Reserve plans to revamp its credit advertising rules to ease compliance and boost consumer benefit. But the central bank isn't quite sure how to accomplish these goals. So it issued a formal proposal late last month asking the public for help.
18909 CREDIT UNIONS Former General Puts Nafcu on the March
Life looks good these days to Ken Robinson, the ex-Marine general who runs the National Association of Federal Credit Unions. In the eyes of the regulators, he's one of the good guys - and the much bigger rival group can't do anything right.
The industry's delinquency ratio should start rising after a 13-year slide, predicts the chief economist of the Credit Union National Association. Such a rise would be a side effect of last year's dramatic loan growth.
18576 CREDIT/DEBIT/ATMs Europe Leads World in ATMs Installed
With 31.33% of all installed ATMs, Europe has surpassed Japan (28.8%) and the United States (25.66%) to become the largest market for automated teller machines, a recent survey found.
The French chip invasion continues as Solaic follows rivals Gemplus and Schlumberger - the top two smart card producers - into the U.S. market. Kurt Brunner is in the process of opening a sales and marketing office for Solaic in San Jose, Calif.
Keycorp, the nation's 11th-largest bank holding company, hired Stephen J. Hucal, national manager of credit policy at Sears, Roebuck and Co., to head its fledgling credit card business.
Key Federal Savings Bank and Mobil Oil have introduced a stored-value card that offers an alternative to using cash, checks, or credit for buying gasoline and other services.
18826 INVESTMENT PRODUCTS Bank Funds Lagged In 2Q Performance
As stock and bond mutual funds rallied in the second quarter, total returns of bank-run funds lagged in most categories - but only slightly. Experts say the difference reflects banks' generally conservative investment strategies.
Clearing firms, once consigned to the back room, are raising their profile by expanding support services to include customized investment products. Not as glitzy as the point of sale, the clearing firms make sure that sales and trades of investments are executed and recorded.
Florida's Insurance Department is close to dismantling a law that blocks banks from selling annuities, a move that could open up a rich market to some of the nation's biggest banks.
The National Association of Securities Dealers is softening its controversial plan to regulate bank brokerages, a top official said.
18888 MORTGAGES Home Equity Pushes Now Year-Around
Banks are increasingly running their marketing campaigns beyond the traditional seasons for home equity lending, say banking professionals and consultants. The change highlights the increasing competition for home equity loans and the shifting uses of second mortgages by borrowers.
For big thrifts, the home mortgage business was a feast last year. This year, it's looking more like a famine. Now that rates have dropped, thrifts are back on a stringent diet as borrowers opt for fixed-rate loans.
Leland C. Brendsel, chairman of the Federal Home Loan Mortgage Corp., said low-down-payment loans for low-income people are going delinquent at up to double the rate for traditional mortgages. He called the performance "disappointing."
18974 TECHNOLOGY Some Major Traders Lack Disaster Plans
A research report found that more than one-quarter of 90 major financial firms lack operational disaster recovery plans for their securities trading rooms.
Checkfree Corp. has joined with Automatic Data Processing to develop a PC-based electronic bill payment and banking service for small and middle- market businesses. July 20
Recent bank mergers should make competition in the cash management business even more cutthroat, an industry consultant predicts. Competition will get stiffer, he said, because the combined banks will have bigger technology budgets and greater economies of scale.
The planned merger between First Chicago and NBD should generate significant cost savings from systems consolidations, bank officials said.
18840 FINANCE Syndicated Lending Set Record in 2Q
Syndicated lending volume hit a new high in the second quarter, thanks in part to investment banking services that banks now offer. A total of $228 billion of syndicated loans came to market in the quarter, according to the Loan Pricing Corp.
In the wake of First Chicago Corp.'s surprise announcement of a merger of equals with NBD Bancorp, midwestern banks are suddenly looking like grist for the consolidation mill. NationsBank Corp. and Banc One Corp. are both rumored to be eager to acquire in the Midwest.
David Hendler, the hip-talking bank bond analyst at Smith Barney, cultivates a reputation as an eccentric. Lately, he's been pushing his favorite pairings - some of them offbeat - for bank mergers. "You've got to be a strategic yenta," he says.
Bank stocks, bonds, and other stocks nose-dived after Federal Reserve Chairman Alan Greenspan cast doubt on future interest rate reductions.