J.P. Morgan & Co. reported a 15% drop in net income for the second quarter, the result of a decline in trading profits.

But analysts saw no disaster in Morgan's fall to $374 million, or $1.85 a share, from $440 million, or $2.14. Some expected worse-the First Call consensus estimate was only $1.75 a share.

Morgan, therefore, did not break the string of favorably received earnings releases by major banking companies. Also on Thursday, First Union Corp. said its profits rose 11%, to $485 million. First Bank System Inc., despite a 30% decline in its net for special, nonrecurring reasons, said operating income rose 7%, to $178 million.

H.F. Ahmanson & Co., despite the costs of its failed takeover bid for Great Western Financial Corp., improved net income by 68%. (See page 4.)

J.P. Morgan's decline "was not as bad as we were expecting," said Rafael Soifer, an analyst at Brown Brothers Harriman & Co.

"Equity investment revenue was expected to be modest, but it turned out to be better."

Morgan had earlier advised that it might fall short of second-quarter expectations. Its $116 million in proprietary trading and investing income was 46% lower than last year's $216 million. Analysts said losses in fixed- income trading in Asia were partially offset by gains in equity trading from the June market rally.

The New York bank's "global business gained momentum through the second quarter after a slow start," said chairman Douglas A. Warner 3d.

Analysts said they did not see Morgan's trading performance as an indicator of what is to come from other money-center banks.

"They each have different strategies," said David S. Berry of Keefe, Bruyette & Woods. "We are expecting pretty robust results out of Citicorp and Chase Manhattan because of their positions in foreign exchange."

Morgan's overall revenues were $1.79 billion, up 1.7% from a year earlier, but down from $1.83 billion in the first quarter.

"While proprietary results were down, revenues from client-related activities rose and investment banking performance was our strongest to date," said Mr. Warner.

Finance and advisory revenues rose 13%, to $481 million, and debt and equity underwriting revenues grew 31%, to $255 million. Morgan took the lead on several large deals during the quarter, including an initial public offering for Hertz Car Rental and a Russian Eurobond issue.

Asset management and servicing revenues gained 12%, to $392 million. Market-making revenues were up 13.8%, to $648 million.

Expenses grew 12%, to $1.24 billion. They included $28 million for the renovation of office space in New York and costs related to upgrading computer systems to solve "Year 2000" problems.

First Union Corp.

First Union of Charlotte, N.C., cited strong fee income as a factor in its record quarterly performance.

The per-share figure of $1.73 was a cent better than the analyst consensus. Adjusting for a stock split, per-share earnings were 87 cents, up from 77 in the 1996 second quarter.

First Union said fees rose 158% in capital markets, to $211 million, and 51% in capital management, to $209 million.

"A lot of banks have been talking about growing revenues, but First Union is actually doing it," said George Bicher, an analyst at Alex. Brown & Sons.

"With the economy continuing to show strength, we expect to maintain our momentum throughout this year," said First Union chairman Edward E. Crutchfeld.

The noninterest income of $755 million was up 38%, and trading account profits rose almost sevenfold, to $54 million.

Trust fees grew 15%, to $84 million. Mutual fund fees more than doubled, from $20 million last year to $56 million.

Loan growth of 6%, to $95.3 billion, came largely from capital markets activities and consumer lending, the bank said.

While the results were generally positive, some analysts were wary of continued erosion in the credit card portfolio. The loss ratio jumped year- to-year to 7.73% from 5.79%. "It was the fly in the ointment," said Anthony Davis, an analyst at Dillon Reed & Co.

"At the moment, they have a high level of net chargeoffs," said David Hilder, an analyst at Morgan Stanley & Co. "But we are expecting that level to decline by the end of the year."

First Bank

First Bank System of Minneapolis' $1.31 a share met the First Call consensus estimate.

Two gains in the second quarter of 1996-a $65 million state tax refund and a $75 million termination fee after its failed acquisition attempt of First Interstate Bancorp and a $65 million state tax refund-caused the net income line to go down.

Fee income and expense controls drove operating income higher.

Credit card and trust fees boosted noninterest income in this year's quarter to $235.4 million, up 7% excluding nonrecurring items.

Credit card fees were up 18% due to strong sales for purchasing and corporate cards and First Bank's affinity card with Northwest Airlines.

Net interest income was $390 million, down $2 million from a year earlier.

Joseph Duwan, an analyst with Keefe, Bruyette & Woods, said First Bank is in good position to integrate its acquisition of Portland, Ore.-based U.S. Bancorp., expected to close Aug. 1. First Bank continues to have one of the best ratios of expenses to revenue in the banking industry, currently 47.7%. And Mr. Duwan said fees should continue to grow after the takeover. +++

First Union Corp. Charlotte, N.C. Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $485.0 $436.0 Per share 0.87(a) 0.77(a) ROA 1.39% 1.29% ROE 19.90% 18.60% Net interest margin 4.36% 4.17% Net interest income 1,357.0 1,289.0 Noninterest income 755.0 546.0 Noninterest expense 1,182.0 1,052.0 Loss provision 165.0 80.0 Net chargeoffs 161.0 102.0 Year to Date 1997 1996 Net income $956.0 $181.0(c) Per share 1.70(a) 1.52(a) ROA 1.40% 1.03% ROE 19.74% 14.99% Net interest margin 4.36% 4.18% Net interest income 2,660.0 2,526.0 Noninterest income 1,508.0 1,072.0 Noninterest expense 2,351.0 2,344.0 Loss provision 310.0 150.0 Net chargeoffs 305.0 250.0 Balance Sheet 6/30/97 6/30/96 Assets $142,942.0 $139,886.0 Deposits 92,934.0 91,453.0 Loans 96,411.0 91,339.0 Reserve/nonp. loans 222.4% 195.0% Nonperf. loans/loans 0.64% 0.79% Nonperf. assets/assets 0.50% 0.60% Nonperf. assets/loans + OREO 0.73% 0.91% Leverage cap. ratio 6.23%(b) 5.60% Tier 1 cap. ratio 7.39%(b) 7.11% Tier 1+2 cap. ratio 12.39%(b) 11.94%

(a) adjusted for stock-split

(b) estimated

(c) after-tax/merger related restructuring charges

J.P. Morgan & Co. New York Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $374.0 $440.0 Per share 1.84 2.14 ROA 0.62% 0.84% ROE 14.10% 17.10% Net interest margin 1.06% 1.01% Net interest income 495.0 397.0 Noninterest income 1,296.0 1,364.0 Noninterest expense 1,241.0 1,104.0 Loss provision NA NA Net chargeoffs (3.0) 8.0 Year to Date 1997 1996 Net income $798.0 $879.0 Per share 3.89 4.28 ROA 0.67% 0.85% ROE 14.90% 17.10% Net interest margin 1.03% 1.02% Net interest income 945.0 793.0 Noninterest income 2,679.0 2,708.0 Noninterest expense 2,432.0 2,189.0 Loss provision NA NA Net chargeoffs (6.0) (5.0) Balance Sheet 6/30/97 6/30/96 Assets $250,490.0 $198,765.0 Deposits 56,977.0 48,457.0 Loans 29,294.0 29,588.0 Reserve/nonp. loans 1,047.2% 839.6% Nonperf. loans/loans 0.40% 0.50% Nonperf. assets/assets 0.04% 0.07% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 5.90% 6.30% Tier 1 cap. ratio 8.00% 8.20% Tier 1+2 cap. ratio 11.30% 11.70%

First Bank System, Inc. Minneapolis Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $178.3 $254.1 Per share 1.31 1.78 ROA 2.02% 2.85% ROE 23.40% 32.4% Net interest margin 4.91% 4.91% Net interest income 389.6 391.8 Noninterest income 235.4 359.9 Noninterest expense 298.1 306.2 Loss provision 39.0 35.0 Net chargeoffs 43.1 36.0 Year to Date 1997 1996 Net income $350.1 $430.9 Per share 2.57 3.04 ROA 2.01% 2.44% ROE 23.30% 27.90% Net interest margin 4.94% 4.89% Net interest income 774.4 771.1 Noninterest income 461.2 743.4 Noninterest expense 594.1 730.6 Loss provision 76.0 66.0 Net chargeoffs 84.4 69.5 Balance Sheet 6/30/97 6/30/96 Assets $37,729.0 $36,184.0 Deposits 25,231.0 24,589.0 Loans 27,863.0 27,029.0 Reserve/nonp. loans 440.0% 418.0% Nonperf. loans/loans 0.41% 0.47% Nonperf. assets/assets 0.35% 0.43% Nonperf. assets/loans + OREO 0.47% 0.58% Leverage cap. ratio 7.20% 6.30% Tier 1 cap. ratio 7.40% 6.80% Tier 1+2 cap. ratio 12.20% 11.50%

Note: adjusted for nonrecurring items

Crestar Financial Corp.

Richmond, Va.

Dollar amounts in millions (except per share)

Second Quarter 2Q97 2Q96

Net income $75.8 $66.9

Per share 0.68 0.60

ROA 1.42% 1.23%

ROE 16.48% 15.20%

Net interest margin 4.58% 4.48%

Net interest income 218.3 218.6

Noninterest income 111.0 91.6

Noninterest expense 179.0 180.7

Year to Date 1997 1996

Net income $147.6 $132.0

Per share 1.32 1.18

ROA 1.37% 1.23%

ROE 16.27% 14.93%

Balance Sheet 6/30/97 6/30/96

Assets $22,809.8 $22,663.0

Deposits 15,846.5 15,854.0

Loans 14,258.7 13,705.3 ===

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