A slew of Midwest banking companies reported healthy second-quarter results on Monday and late Friday, with loan growth fueling most performance gains.
In Minneapolis, Norwest Corp. boosted average loans 15.3% from a year ago. Net income rose by 19.6%, to $202 million. TCF Financial Corp., a thrift, grew average loans by 5.9% and rebounded from a year-ago merger charge, more than tripling earnings to $13.94 million.
In Cleveland, Keycorp Inc. raised average loans by 10.1%, boosting earnings by 12.7%, to $221.8 million. Meanwhile, National City Corp. delivered a 12.5% increase in average loans, boosting earnings by 3.22%, to $105.8 million.
In other results, Northern Trust Corp., Chicago, earned $48.7 million, a 17% increase driven by gains in fee revenues and asset quality. Rival LaSalle National Corp. earned $36.4 million, a 14% increase.
Firstier Financial Corp., Omaha, lifted earnings by 10.1%, to $12.95 million.
Norwest Boosts Loans
Boosting both loans and its net interest margin, Norwest racked up healthy increases in earnings and profitability in the second quarter. Prior results were restated to reflect the January stock-swap acquisition of First United Bank Group, Albuquerque.
The $55.8 billion-asset Norwest said average net loans rose 15.3% from a year ago. Funding costs fell slightly faster than did yields on earning assets, helping Norwest's net interest margin expand by 11 basis points, tO 5.65%.
Norwest said the prof liability of its mortgage banking unit was virtually cut in half as mortgage originations dropped by 22.7%. The unit posted a 0.89% annualized return on assets, Norwest said, compared with 1.77% a year ago.
An ROA of 1.24% at Norwest's commercial banking subsidiary rose 24 basis points from a year ago, while a 3.96% ROA at Norwest's finance company slipped by 3 basis points.
Norwest suffered a loss of $43.5 million on securities investments in the second quarter, lowering noninterest income 8.25% from a year ago. Partially offsetting the shortfall was a $15 million gain on venture-capital investments. A loss provision of $23.7 million was down 3.9% from a year ago.
Henry C. Dickson, a banking analyst with Smith Barney, said Norwest appeared poised to continue its loan expansion while sustaining a return on assets of 1.40% or better.
Keycorp capitalized on loan growth and firming credit quality to boost earnings and profitability.
The bank said average loans rose by 10.1%, sufficiently overcoming a 43 basis-point drop in its net interest margin to permit a mild 0.8% increase in net interest income. Also aiding strong results was a 41.2% drop in the company's loss provision.
"What carried the day for Keycorp was balance sheet growth and, to a lesser extent, expense controls," said Lawrence Vitale, a banking analyst with Bear Stearns & Co. Quarterly operating expenses dropped 5.5% from a year ago, Keycorp said.
But the banking company suffered a noticeable drop in fee revenues - 10.2% - as mortgage banking revenues plummeted 30% and the September 1993 sale of Ameritrust Texas skewed year-to-year comparisons. The company said the mortgage banking setback "reflected the dramatic industry-wide decline in origination activity from record levels of last year."
National City largely offset a 16 basis point drop in its net interest margin with 12.5% increase in average loans, sustaining peak levels of profitability. The Cleveland-based banking company said its strongest balance sheet growth was in residential mortgages, followed by consumer and commercial credits.
Net interest income rose by 2.7%, non-interest income rose by 4.7%, and the company's loan-loss provision fell by 15.9%.
Fred Cummings, a banking analyst with McDonald & Co., Cleveland, said loan growth was the bright spot in National City's results, noting that the company gained momentum from the first quarter. Mr. Cummings said the company also stands to gain from further drops in its quarterly loss provision.
Chicago-based Northern Trust posted quarterly earnings of $48.7 million, a 17% increase.
Annualized, returns at the $18.4 billion-asset banking company equaled 1.1% on average assets, up 4 basis points; and 18.06% on average equity, unchanged from a year ago.
David W. Fox, chairman and chief executive, cited fee revenue growth, firming asset quality, and gains from sale of Northern's stake in an overseas banking company as key factors in the company's performance.
TCF Financial Profit Triples
Rebounding from year-ago results that were depressed by a merger charge, Minneapolis-based TCF Financial Corp. said its earnings more than tripled to $13.94 million. Excluding the change, earnings were up 19%.
The $5 billion-asset thrift holding company said annualized returns equaled 1.16% on assets, up 19 basis points from normalized results of a year ago; and 18.49% on equity, up 113 basis points.
LaSalle National Corp., the Chicago-based subsidiary of Dutch banking giant ABN Amro, said second quarter earnings rose 14% to $36.4 million.
The $12.9 billion-asset bank and thrift holding company said annualized returns equaled 1.16% on assets, a decline of 4 basis points; and 24.92% on equity, an increase of 18 basis points.
Annualized returns at the $3.1 billion-asset Firstier equaled 1.68% on assets, up 11 basis points; and 16.62% on equity, down 37 basis points.
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