Another crop of Midwest financial institutions reported healthy third quarter loan growth on Monday, but higher net income did not uniformly translate into higher profitability.
Cleveland-based Keycorp said it earned $229 million, up 14% from a year ago. Detroit-based Comerica Inc. said earnings advanced 20.2%, to $100.6 million. And a Minneapolis thrift, TCF Financial Corp., lifted earnings by 28%, to $15.5 million.
First Chicago Corp. posted a 46% earnings decline to $153.8 million, saying results had norrealized from prior-year figures bloated by equity investment gains.
NOrthern Trust Corp. said earnings rose 12%, to $48 million; and LaSalle National Corp, said earnings rose 12%, to $30.8 million.
Each of the reporting institutions showed noticeable loan growth. Keycorp, a $64.5 billion-asset banking company formed in the spring from the merger of Keycorp and Society Corp., drew on loan growth, efficiency gains and firming credit quality in surpassing the strong profitability measures of a year ago.
The newly minted superregional is still in the early stages of recognizing projected cost savings from the union, benefiting the most in the early going from loan growth and a falling loss provision.
Although the company's net interest margin dropped by a precipitous 51 basis points, to 4.79%, it mustered a 13.5% increase in average loans, permitting a slight increase in net interest income.
First Chicago saw its performance indicators fall from year-ago results, which were inflated by massive equity securities gains. But management said core results were stable, and analysts contended the bank deserves more recognition than it is getting in the stock market.
"First Chicago is delivering on a lot of key items," said Goldman, Sachs & Co.'s Robert Albertson. "It is really puzzling that the stock is trading at less than a 10% premium over book value."
Richard L. Thomas, chairman and chief executive of First Chicago, said the company's credit card and middle-market banking units were delivering double-digit loan growth, and that he expected the trend to continue. He said brightening prospects for the corporate banking division, plus stabilization in the community banking division, would provide further earnings support next year.
The executive noted that First Chicago's credit quality remains strong, but said he shared the industry concern that lending standards are dropping. "We are not comfortable with some of the terms and conditions surfacing in the market," said Mr. Thomas. "With Considerable anguish, we are passing up some opportunities."
Mr. Albertson said First Chicago needs to raise profitability from a current 15% return on common equity, and he estimated it might take up to a year until planned efficiency and revenue enhancements bring that to pass.
Comerica, a $31.8 billion-asset banking company, said acquisitions and commercial loan growth helped fuel a 12% increase in net interest income. The company's loss provision was a modest $14 million, down $1 million from a year ago.
Securities gains and increased revenues from service charges and revolving credit fees lifted noninterest income, Comerica said, but mergers also helped boost noninterest expense. Overall, the ratio of operating expenses to revenues fell by 3.2 percentage points, to 60.7%.
Northern Trust, which holds $18.7 billion of banking assets and administers $494.8 billion of trust assets, said annualized returns on assets equaled. 1.05%, flat from a year ago, Returns on average common equity equaled 17.02%, down 71 basis point.
David W. Fox, chairman and chief executive, cited a 13% increase in trust fees, a midyear acquisition and broad-based internal growth in the company's earnings boost.
Northern posted a 12.8% increase in average loans, largely fueled by a mortgage loan expansion, and a 23.8% increase in securities investments. A net interest margin of 2.33% was flat from the second quarter and down 23 basis points from a year ago.
LaSalle National, which holds $13.3 billion of assets, is one of several Chicago depository units owned by ABN Amro Bank. Although LaSalle's profits grew, profitability slipped.
The company posted an annualized return on average assets of 0.94%, a decline of 4 basis points from a year ago. An enlarged capital ratio depressed returns on average equity by 184 basis points, to 18.04%.
Harrison F. Tempest, LaSalle's chief executive, said the raw earnings increase was fueled by a 20% rise in net interest income, largely stemming from loan growth; and by a 21% increase in fee income, aided by growth in data processing fees charged to affiliates. He also noted that year-ago results were lowered by securities losses.
TCF, a $5 billion-asset thrift holding company, said annualized returns equaled 1.29% on average assets, an increase of 31 basis points from a year ago. Although fee revenues fell slightly and overhead outlays rose 9%, TCF delivered a 17% increase in net interest income.
[Tabular Data Omitted]