Several major banking companies in the Northeast announced a mixed bag of first-quarter earnings, generally in line with expectations, that one analyst said reflected their common efforts to "run a lean and mean shop."
Pittsburgh-based Mellon Bank Corp. reported $160 million in net income, up 13.4% from $141 million a year earlier.
"Our first-quarter performance reflects a strong net interest margin and continued emphasis on cost control," said Frank V. Cahouet, chairman, president, and chief executive officer. "Even though Mellon has the highest common shareholders' equity ratio among large banks, our return on common shareholders' equity has increased significantly during the last several years, now outpacing the banking industry."
Analysts expressed some concern with a lack of loan growth.
Dennis F. Shea at Morgan Stanley & Co., said he found margins strong along with expense controls. "Mellon has a larger investment presence in the Northeast than a Bank of New York," he said.
Mutual fund and custody fees decreased $16 million, compared to first quarter 1994. Revenue was down $8 million due to the second quarter 1994 sale of the Boston-based third-party mutual fund administration business. There was also a $4 million decrease at Dreyfus Securities, while revenue from the management of Dreyfus' mutual fund assets decreased $6 million.
However, analysts agreed the decrease in trust and investment management fees resulted from narrowing margins in a quarter when short-term interest rates rose, and there was less securities lending in the latest quarter.
"Trust revenues were a little lighter than what we were looking for," said Sally Pope Davis of Goldman Sachs. "But turning a big mutual fund company, like Dreyfus, is almost the same as turning an ocean liner." She said investors seem to be more excited recently about changes at Dreyfus.
State Street Boston Corp., reported earnings at $54.3 million, up fractionally from $54.2 million.
Marshall N. Carter, chairman and chief executive, said revenue growth was below the long-term goal of 12.5% real growth for the 1990s. "Our primary financial objective is sustainable real growth in earnings per share," he said.
Earnings per share for the first quarter rose three cents, to 68 cents. Assets under management and under custody jumped 29.5% and 9.3%, respectively. Salomon Brothers analyst, Diane Glossman, said this indicates that the "pipeline" is filling.
Philadelphia-based CoreStates Financial Corp. reported first-quarter income of $113.6 million, or 79 cents per share, up from $97.8 million, or 68 cents a share. The return on average assets was 1.63%, on average equity of 19.63%.
The results were restated to reflect the recent acquisition of Independence Bancorp. CoreStates has $28.3 billion in assets.
Integra Financial Corp., Pittsburgh, with $14.3 billion in assets, reported net income of $40.2 million or $1.22 per share, down from $46.8 million, or $1.38.
First Empire State Corp., with $11.3 billion in assets, showed earnings per share up to $3.85 from $3.77, caused by a reduction in the number of outstanding shares. Net income for the Buffalo-based bank declined from $27.6 million in 1994's first quarter to $27.2 million.
Gerard S. Cassidy, analyst at Hancock Institutional Equity Services, said net interest margin pressure has been mounting, and the trend will continue for the next six to nine months for most banks in the region.
"Loan growth in Northeast banks has been spotty," Mr. Cassidy said. "The economy doesn't seem to be growing as rapidly as in other regions." Key asset quality improvement has slowed and year-to-year loan-loss provisions will be more difficult. +++ Mellon Bank Corp. Pittsburgh Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $160.0 $141.0 Per share 1.08 0.96 ROA 1.77% 1.67% ROE 17.55% 16.12% Net interest margin 4.80% 4.69% Net interest income 392 371 Noninterest income 399 436 Noninterest expense 495 530 Loss provision 20 20 Net chargeoffs 26 17 Balance Sheet 1/95 12/94 Assets $39,691 $37,544 Deposits 27,005 26,786 Loans 26,696 24,537 Reserve/nonp. loans NA NA Nonperf. loans/loans 0.58% 0.80% Nonperf. assets/assets NA NA Nonperf. assets/loans + OREO 0.91% 1.27% Leverage cap. ratio 8.8%* 8.99% Tier 1 cap. ratio 9.5%* 10.00% Tier 1+2 cap. ratio 12.8%* 13.50% *Estimated ===
