Criticized last year for lackluster profit growth, First Virginia Banks Inc. is showing signs of improvement.
On Thursday the Falls Church company announced earnings for the quarter of $34.2 million, or 68 cents per share, 10% more than a year earlier.
That prompted Credit Suisse First Boston to raise its 1999 estimate by 10 cents, to $2.75 per share. Merrill Lynch & Co. and Morgan Stanley Group both increased their estimates by 5 cents, also to $2.75. J.P. Morgan Securities raised its estimate by 4 cents, to $2.74.
"First Virginia seems to be moving in the right direction-something we haven't seen in quite some time," said William R. Katz, an analyst at Merrill Lynch.
First Virginia has $9.4 billion of assets and operates 10 banks with 392 branches in Virginia, Maryland and Tennessee. Its improved second-quarter earnings are attributed mainly to strong loan growth and reduced expenses.
The company's loan portfolio grew 13% from March 31 to June 30, boosted by a 28% increase in auto loans and a 7% rise in commercial loans. Also, expenses dropped 6% after the company consolidated two of its banks' charters and some overall back-office functions.
"We've had three consecutive quarters of upward momentum," said Richard F. Bowman, the chief financial officer. "The efficiencies are starting to show through."
The company improved its performance ratios as well. Return on assets climbed to 1.44%, from 1.40% in the second quarter of 1998, and its return on equity was 13.29%, up from 12.51%. Meanwhile, its efficiency ratio dropped slightly, from 59.1% to 57.9%.
Despite the encouraging signs, Wall Street remains cautious.
Eleven of the 13 analysts who track First Virginia stock continue to maintain a "hold," saying it is slightly overvalued.
The company is trading at about 18.4 times the 1999 earnings estimate, while others in its peer group are at about 16.6 times earnings.
Shares of First Virginia were trading at $50.1875 at midday Tuesday.