Mellon Bank Corp. used securities gains and tax benefits to rocket into first place as the most profitable of the nation's 56 largest institutions during the third quarter, according to an American Banker ranking.

The Pittsburgh-based bank company led a pack of 25 super-regionals -- which as a group out-performed their money-center and smaller competitors. Combined with tax loss carryforwards, Mellon rewarded investors with a return on assets of 2.15% and a return on equity of 30.43% in the third quarter.

The superregionals' median return on assets rose to 1.15% in the third quarter, from 0.94% in the year-earlier period, while median return on equity rose to 15.65%, from 13.87%.

Results Up at Money-Centers

The eight money-center banks saw their median ROA rise to 0.81%, from 0.56%, and ROE jump to 14.52%, from 10.86%. The regionals recorded an ROA increase to 1.04%, from 0.87%, and a rise in ROE to 14.54%, from 13.71%.

Mellon rose meteorically, from 11th place a year ago among superregionals in ROA and 10th in ROE. The jump was driven by $76 million in gains from securities sales, or 44.4% of the company's third-quarter pre-tax income.

Analysts cautioned against reading too much into Mellon's stellar performance. The securities sales were geared toward raising capital for its upcoming acquisition of the Boston Co. Mellon is paying $1.45 billion in cash, stocks, and warrants.

Mellon's special situation notwithstanding, superregionals showed strong fundamentals during the quarter, according to Jeffrey Naschek, an analyst at Salomon Brothers Inc.

Widespread Improvement

The companies, defined as those with at least $20 billion of assets and operating in many geographic locations, continued to show improving credit quality, strong fee income, and better expense control.

Fifteen of the 25 largest superregionals had ROAs at or above 1%, compared with just eight last year. Fourteen had ROEs of 15% or better, compared with seven last year.

Banc One Corp., with a robust 6.47% net interest margin, ranked No. 2 behind Mellon in return on assets, at 1.5%. Its ROE of 17.23% ranked it sixth among its peers.

Several other Midwestern giants - including Cleveland's Society Corp. and Minneapolis' Norwest Corp. - recorded strong performances.

Society, which bought rival Ameritrust Corp. this year, rose in the rankings, from 13th place among superregionals a year ago, to second place in ROE and third place in ROA.

Its earnings reflected a strong jump in net interest margin, to 5.51%, from a pro forma 4.69% a year ago. Its loan-loss provision helped as well, dropping 22% from the previous period, which helped boost earnings to $82.8 million.

Effect of Securities Gains

Like Mellon, Norwest had hefty securities gains - for 25% of its quarterly profit. The Minnesota company saw its ROA jump to 1.36%, from 1.17% a year ago, and its ROE rise to 18.90%, from 18.27%.

Wells Fargo & Co., dogged by continuing real-estate problems, ranked last among the 25 superregionals. Its return on assets plummeted to 0.18%, from 0.63% a year earlier, while its return on equity sank to 1.46%, from 10.79% in the year-earlier quarter.

The 23 large regional banks, defined as those with assets of $10 billion to $20 billion, also recorded big gains in profitability in the third quarter as credit problems eased and margins widened.

Thirteen reported ROAs of 1% or greater, compared with only five the year before. Ten earned ROEs of 15% or better, compared with five last year.

Pittsburgh's Integra Financial Corp. was among the biggest gainers. Its net income of $71 million, up 52% from the year earlier, translated into an annualized return on assets of 1.40%, up from 0.87% a year ago, and a return on equity of 24.13%, up from 13.71%. It ranked No. 1 among its peers in ROE and NO. 2, behind Firstar Corp., in ROA.

Least Profitable Group

The eight money-center banks again proved less profitable as a group than their smaller competitors, but five recorded significant increases from their dismal performances in the 1991 third quarter.

Many of the banks, defined as very large companies with an orientation toward commercial-and-industrial lending and international banking, generated big trading profits in the quarter.

J.P. Morgan & Co. led the pack in return on assets and equity. Its ROA of 1.25% and ROE of 25.54%, however, declined from 1.40% and 28.26%, respectively, in last year's third quarter.

Bankers Trust New York Corp. again took second place, and it, too, saw declines. Its ROA of 1.07% had slipped from 1.28% last year, and its ROE of 25.22% dipped from 25.47% the year earlier.

Both companies had exceptionally strong trading revenue in the 1991 period, and they suffered this period from interest-related derivative positions in foreign currency markets.

Mortgage Refinancings

Morgan, whose trading income of $313 million was down 16% from the year earlier, also took a hit on its portfolio of mortgage-backed securities, which were affected by unexpectedly high levels of mortgage refinancings.

Continental Bank Corp., Chemical Banking Corp., Republic New York Corp., Chase Manhattan Corp., and Citicorp all rebounded from their performances of a year ago.

Only First Chicago Corp., which posted a quarterly loss of $365 million as a result of a big reserve taken to write down bad real estate loans, saw significant drops in its already poor performance ratios.

However, its nonperforming assets at the end of the quarter fell to 1.05% of all assets, from 2.93% the year earlier.

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