Keycorp Stays in Black With One-Time Items; Harris Up, Firstar Off

Keycorp used a series of nonrecurring items and a 50% cut in the loan- loss provision to post flat earnings for the first quarter.

The Cleveland-based company said it had earned net income of $209.7 million, or $1.1 million more than profits reported a year ago.

Keycorp recognized a net gain of $35.8 million from the sale of its mortgage servicing and asset management operations. Other one-time benefits came from a cut in the loan-loss provision to $18.5 million, and from tax benefits on pre-1992 acquisitions that trimmed the tax bill to $61.6 million.

The company offset $30.9 million of these benefits by taking a loss on the sale of securities. The action was taken to help reposition the balance sheet.

"These results ... included the effects of several items related to previously announced initiatives intended to reduce interest rate exposure and accelerate long-term revenue and earnings growth," said Victor Riley Jr., Keycorp's chairman and chief executive.

Competitive pressures and rising interest rates also had an effect. The net interest margin fell to 4.38% from 5.03% a year earlier. As a result, net interest income for the quarter fell 3.5%, to $658.8 million.

Noninterest income also fell. The 24.5% decline, to $171 million, was due largely to the securities loss. Noninterest income fell by 2%, or $4.3 million, however, even without the loss on securities.

For Joel Gomberg, a bank analyst with Duff & Phelps Investment Research, Chicago, the losses signal slow growth in the coming quarters.

"If you sift through a lot of one-time items and get to what revenues and expenses are doing, you see they had very sluggish revenue growth," he said. "I think you're going to see sluggish revenue growth going forward, and what is going to drive earnings per share is lower loan-loss provisions, share repurchases, and better expense control."

Meanwhile, Chicago-based Harris Bank, with assets of $16.6 billion, said it had earned $38.1 million in the first quarter, a 24.1% increase over the same period last year. These results include Harris Bankcorp and Harris Bankmont Inc., both wholly owned U.S. subsidiaries of Bank of Montreal.

A three basis-point gain in net interest margin, combined with an 8% rise in the loan portfolio, helped push net income 11% higher than a year earlier, to $130.4 million. Earnings also benefited from a 35.6% cut in the loan-loss provision, to $8.8 million.

Special charges also hurt Milwaukee-based Firstar Corp. During the quarter, merger-related costs led to a 38.7% decline in net income, to $35.2 million, or 48 cents a share.

One-time restructuring charges amounted to $22.1 million, after taxes. Included were $10.6 million in severance and other costs, a $5.5 million addition to the loan-loss provision, a $3.5 million loss on securities sales and a $2.5 million write-off of equipment and office closings.

The company also said its net interest margin narrowed during the quarter. The margin of 4.82% was 28 basis points lower than a year earlier and 20 basis points under the margin reported for the fourth quarter.

Roosevelt Financial Group Inc. said higher revenues and lower noninterest expense led to a 51.6% jump in first quarter earnings, to $23.5 million.

The $9.1 billion-asset holding company for St. Louis-based Roosevelt Bank, reported gains in both interest and noninterest revenues.

A 93.7% increase in noninterest income, to $9.1 million, came from higher fees on its retail banking and insurance businesses, and from a $1.5 million gain on securities.

Also, a 17.7% increase in average loan balances, to $8.5 billion, led to a 10.9% increase in interest income.

On the expense side, the company reported a 12.2% decline in noninterest expense, to $21.5 million. The biggest contributor to the decline was a 1.8% cut in compensation costs, to $8.6 million. +++ Keycorp Cleveland Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $209.7 $208.6 Per share 0.86 0.85 ROA 1.28% 1.41% ROE 18.26% 19.20% Net interest margin 4.38% 5.03% Net interest income 658.8 682.7 Noninterest income 171.0 226.6 Noninterest expense 560.8 542.8 Loss provision 18.5 36.8 Net chargeoffs 17.3 31.3 Balance Sheet 3/31/95 3/31/94 Assets $67,709.0 $61,478.9 Deposits 48,812.3 46,880.6 Loans 48,020.8 41,379.8 Reserve/nonp. loans 285.51% 256.53% Nonperf. loans/loans 0.63% 0.77% Nonperf. assets/assets 0.54% 0.69% Nonperf. assets/

loans + OREO 0.75% 1.12% Leverage cap. ratio 6.31%* 6.85% Tier 1 cap. ratio 7.90%* 8.91% Tier 1+2 cap. ratio 10.96%* 12.34% * Estimated ===

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