Republic New York Corp. said Wednesday that its first-quarter profits fell 60.4%, to $46.5 million, as a restructuring charge offset large trading gains.

The $104 million pretax hit was part of a previously announced reorganization focusing on private banking, retail services, and niche corporate businesses. Without the charge, profits were down 2.9%.

Still, the bank's performance was better than expected. Earnings per share of $1.03 beat analysts' consensus estimates by 13 cents.

Republic is on the rebound from a difficult second half, when it was rocked by the collapse of Russia's currency. Those troubles led to a loss for the third quarter and a 45% drop in profits for all of 1998.

"Six months ago they were a broken-down vehicle," said Gerard Cassidy, an analyst at Tucker Anthony. Now "they look like they're back on the highway."

The second quarter ushers in new management at the $50.4 billion-asset company. Dov C. Schlein, formerly chief operating officer, took the helm as chairman and chief executive officer Wednesday, succeeding Walter H. Weiner, who retired.

"We've made progress in the implementation of the business strategy we've put in place," Mr. Schlein said in a statement. "We have already achieved initial savings from our restructuring program, and we expect an accelerated rate of impact" through 1999, he added.

Cost savings totaled $2 million in the quarter. Republic said it expected to achieve another $9 million in savings by the end of June and aimed to save $67 million in annual costs from the restructuring after 18 months.

The charge covered a 10% work force reduction in which 433 positions were eliminated and another 127 employees were hired by Computer Sciences Corp. as part of an outsourcing contract.

Total expenses in the first quarter, including the charge, rose 40%, to $352.8 million. Without the charge, expenses fell 1%.

Fee income rose 26%, to $154.5 million, driven by a 36% surge in trading revenues, to $90 million. Foreign exchange income was especially robust, doubling to $61.4 million.

Income from consumer financial services and private banking rose 5%, to $16.4 million.

Republic has been slashing its exposure to overseas markets since last year. During the first quarter, the bank reduced its exposure to Latin America by $400 million.

Shares in Republic ended Wednesday's trading down 69 cents, to $52.69.

Washington Mutual Inc.

Reporting late Tuesday, Seattle-based Washington Mutual Inc. said strong growth in checking accounts and mortgage banking helped boost first-quarter net income 20%, to a record $441 million.

Earnings per share of 79 cents beat analysts' consensus estimates by two cents. The $174.3 billion-asset thrift notched fee income of $352 million, a 33% gain.

The company added more than 93,000 new checking accounts during the quarter, boosting retail banking fees 37%, to $163 million.

However, analysts were disappointed with the net interest margin, which shrank to 2.79%, compared to 2.91% in the first quarter of 1998. The deterioration was largely attributed to the thrift's purchase of roughly $9 billion in mortgage-backed securities to help counter slow growth in the loan portfolio, analysts said.

"The very thin spread on mortgage-backed securities dilutes the margins," said Caren E. Mayer, an analyst with NationsBanc Montgomery Securities. "They need to focus on what types of assets they are adding to the balance sheet."

The thinner margin, coupled with higher-than-expected quarterly expenses, helped drive Washington Mutual's stock price down 50 cents, to $41.25 at Wednesday's close.

"The bears are focusing on the first quarter, rather than the fact that the expense (cuts) are setting the stage for a strong second half," said Thomas O'Donnell, an analyst with Salomon, Smith Barney. "But overall, I don't think this was a bad-looking quarter."

Washington Mutual continued to replace its time deposits with lower-cost transaction accounts. At the end of the first quarter, checking, savings, and money market deposits accounted for exactly half of total deposits; a year earlier, transaction accounts comprised 41% of deposits.

Strong regional economies, low interest rates, and the company's growing franchise, most recently enlarged by last year's acquisition of H.F. Ahmanson & Co., helped overall loan originations increase 9%, to $11.9 billion.

Single-family mortgages were up 12%, to $9.7 billion. But origination of other loans, including consumer, commercial, and residential construction credits, declined 2%, to roughly $2.2 billion.

Revenue growth and cost savings from the integration of recent acquisitions helped improve the company's efficiency ratio to 47.62%, versus 49.16% in the year-earlier period.

"We anticipate additional improvement in our efficiency ratio as 1999 progresses, particularly during the second half of the year after the operations of Ahmanson are fully combined with ours," said Washington Mutual president and chief executive officer Kerry K. Killinger.

Washington Mutual announced a plan to buy back up to 20 million shares of its common stock. As of March 31, the thrift had roughly 595 million shares outstanding. +++

Washington Mutual Inc.


Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $444.1 $370.8

Per share 0.76 0.64

ROA 1.08% 0.99%

ROE 18.72% 18.01%

Net interest margin 2.79% 2.91%

Net interest income 1,127.2 1,060.3

Noninterest income 352.1 264.4

Noninterest expense 729.9 674.7

Loss provision 41.7 50.0

Net chargeoffs 45.0 51.7

Balance Sheet 3/31/99 3/31/98

Assets $174,295.1 $157,458.1

Deposits 84,179.6 89,726.3

Loans 108,044.2 146,750.8

Reserve/nonp. loans 119% 103%

Nonperf. loans/loans 1.10% 1.41%

Nonperf. assets/assets 0.68% 0.94%

Nonperf. assets/loans + OREO NA NA

Leverage cap. ratio NA NA

Tier 1 cap. ratio NA NA

Tier 1+2 cap. ratio NA NA

Republic New York Corp.

New York

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $46.5 $117.5

Per share 0.38 1.03

ROA 0.34% 0.82%

ROE 6.32% 15.16%

Net interest margin 2.52% 2.37%

Net interest income 263.6 268.2

Noninterest income 154.5 122.6

Noninterest expense 352.8 251.7

Loss provision 4.0 4.0

Net chargeoffs 4.1 5.4

Balance Sheet 3/31/99 3/31/98

Assets $50,453.0 $54,771.9

Deposits 32,731.7 33,496.4

Loans 13,966.5 13,204.2

Reserve/nonp. loans 337.37% 386.59%

Nonperf. loans/loans 0.62% 0.64%

Nonperf. assets/assets 0.19% 0.18%

Nonperf. assets/loans + OREO 0.67% 0.75%

Leverage cap. ratio 6.53%* 5.72%

Tier 1 cap. ratio 13.70%* 12.32%

Tier 1+2 cap. ratio 22.55%* 20.54%

* Estimated ===

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