Change often brings confusion, and all the changes currently under way at such companies as Banc One Corp. and U.S. Bancorp have bewildered and frustrated some analysts and investors.
Banc One last week issued what some Wall Streeters regard as among the most cluttered earnings statements they have ever dealt with. One critic called it "indecipherable."
The second-quarter report contained a dizzying array of one-time gains and charges, mostly related to the company's purchase of First Commerce Corp., New Orleans, plus the cost of new automated teller machines.
But the statement was so impenetrable that analysts, looking for guidance about Banc One's upcoming merger with First Chicago NBD Corp., said it was hard to know with certainty just how much money the bank is making.
Diana Yates, a banking industry analyst at A.G. Edwards & Sons Inc., sifted through the numbers and determined that Banc One's "core run rate"- earnings after all the one-time gains and expenses-was 73 cents per share, a surprising 13 cents less than the per-share earnings that the company reported.
Scott Edgar, director of research at SIFE Trust Fund, said it first appeared to him as if Banc One had earned 53 cents per share after all charges taken, but then he figured he had to account for substantial loan growth and gains from selling branches, mortgage servicing rights, and securities.
In the end, he said, "I threw up my arms" in bewilderment.
It wasn't the first time Banc One had presented a baffling earnings statement. Its second-quarter report last year was nearly as complex, because it included one-time charges and gains related to the company's acquisition of First USA Inc.
The Banc One situation is the latest example of something that many bank investors and analysts have known for some time: Mergers make a mess of earnings reports.
And as the nation's banking companies grow and become more complex, their earnings reports are more often becoming "noisier," in the parlance of Wall Street professionals.
"It's something that's becoming more and more a concern," said Mr. Edgar, whose Walnut Creek, Calif. mutual fund invests primarily in bank stocks.
"I try to separate the noise from the underlying growth of the company, but that's getting harder to do when these one-time charges stemming from mergers become bigger and more frequent," he said.
U.S. Bancorp's most recent earnings report is not so complicated as Banc One's. But charges the company calls "nonrecurring" related to the First Bank System Inc.-U.S. Bancorp deal, which closed a year ago, continue to hurt earnings.
The Minneapolis banking company, formerly known as First Bank System, reported $37.6 million of after-tax nonrecurring charges in the second quarter related to the U.S. Bancorp acquisition, and said that an additional $53 million in after-tax nonrecurring charges would be incurred in the next two quarters.
The company added that the charges would be 5.6% higher than had been predicted when the merger deal was announced in March 1997.
But what puzzled Mr. Edgar most was that these charges continue to show up on the balance sheet as special events.
"If the charges continue to show up for a year and a half, are they really nonrecurring?" he said.
At some companies, special charges have become so common that analysts have learned to expected them.
For example, for the past three quarters First Union Corp. has reported "special charges" related to its numerous mergers.
In the second quarter the company reported $634 million of charges related to its acquisition of CoreStates Financial Corp. Those charges dropped earnings per share to 26 cents, from 92 cents before the charges.
Charges from the company's acquisition of Wheat First Butcher Singer Inc. knocked off 3 cents per share in the first quarter, and the Signet Banking Corp. purchase caused fourth-quarter earnings to drop to 57 cents per share, from 82 cents before "special charges."