Higher interest rates are hurting some regionals more than others, reports Friday from three of them show.

National City Corp. of Cleveland said its net income fell 8%, to $321.3 million or 53 cents a share, in the first quarter. That was 2 cents below analyst estimates.

Fifth Third Bancorp said its profits rose 17%, to $206 million or 66 cents a share, beating the consensus by a penny.

And Centura Banks Inc., in Rocky Mount, N.C., reported a 70% plunge in profits, to $8 million, citing charges related to its merger with Triangle Bancorp. Excluding the charges, earnings per share of 90 cents missed estimates by 1 cent.

Analysts said some regional banking companies that have a more traditional mix of lending and deposit businesses are being trapped by the rising costs of making loans and a dearth of cheap deposits with which to fund them.

Indeed, narrowing margins caused by higher interest rates and a "greater reliance on longer-term wholesale funding" led to the decline at National City, said David A. Daberko, chairman and chief executive officer of the $86.9 billion-asset company, in a statement.

Net interest income fell 3%, to $732 million. Noninterest income declined 6%, to $579 million. Revenues in its processing business dropped 22%, to $94 million. Mortgage revenues were $111 million - up 20% against the year-earlier period but down 12% compared with the fourth quarter.

While the loan portfolio grew, National City struggled to maintain deposit growth, which would have lowered its costs to fund the loans. Loans rose 3% from the fourth quarter and 8.5% from last year, to $45.7 billion. Deposits dipped 3%, to $50 billion.

One analyst said the first quarter began a "transition year" for National City, which has vowed to allocate more of its budget to consumer banking and focus its lending business on higher-yielding loans.

"They've been spending more on the Internet and marketing," said Henry C. Dickson, an analyst at Citigroup's Salomon Smith Barney Unit.

National City shares fell $1.8125 to close at $18.3125, on a dreadful day for the market.


Fifth Third BancorpFifth Third said higher deposits helped it avoid a similar problem with interest rate pressures.

Helped by its Millennium Checking campaign - which used old-fashioned promotional tactics like kitchenware giveaways to win about to 200,000 new accounts - deposits at Fifth Third rose 18%, to $29 billion. Loans rose 16%, to $41.1 billion.

"Strong checking revenues offset higher interest rate pressure and helped us fund our loan growth," said Neal Arnold, chief financial officer.

Net interest income rose 7%, to $363 million. Fee income, led by revenues from its data processing subsidiary, Midwest Payment Systems, increased 16%, to $240 million. Data processing revenues rose 33%, to $51 million, and deposit fees rose 21%, to $48 million.

Mr. Arnold acknowledged that higher interest rates are making banks' job tougher; his own company also increased its reliance on short-term borrowings - by 25%, to $37 million. Total interest expenses rose 34%, to $403 million.

Fifth Third shares fell $4.25 to close at $59.0625.


Centura Banks Inc.The $11 billion-asset company had $39.4 million of charges involving its merger with Triangle. Net interest income rose 3.5%, to $105 million. Fee income fell 34%, to $28 billion, mostly as a result of $15.1 million in losses from the restructuring of an investment portfolio acquired with that deal.

"Financially, we expected this to be a messy quarter due to a number of merger-related charges that make meaningful comparisons difficult," said Cecil W. Sewell, chief executive officer. Centura shares fell $2.6875 to close at $41.8125.

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