Five of the largest bank holding companies reported double-digit gains in net income for the first quarter.

Some that announced Tuesday benefited from recent megamergers and the sharp rebound in the stock market. Others said the strong economy had helped specific business lines.

Chase Manhattan Corp. jumped 62%, to $1.17 billion, bolstered by growth in its consumer operation and record trading results.

At Bank One Corp., which bought First Chicago NBD Corp. in October, market activities helped drive earnings up 23%, to $1.15 billion.

Wells Fargo & Co., the result of Norwest Corp.'s November purchase of the old Wells in San Francisco, said pumped-up returns in its mortgage division contributed to a 29% rise in net income, to $884 million.

Mellon Bank Corp.'s earnings were up 23%, to $254 million, and State Street Corp.'s 15%, to $121 million.

"It's a pretty good showing in bankland," said David Berry, director of research at Keefe, Bruyette & Woods Inc.

"Market-driven revenues are helping," said Diana Yates, an analyst at A.G. Edwards & Sons in St. Louis. "We're also seeing some signs of expense control. Fee income remains strong, and the margins held up better than we thought."

As these major banking companies continued the generally favorable earnings-reporting trends of recent days, observers were questioning the sustainability of earnings at institutions like Chase that are booking big gains from volatile businesses.

"They had a wonderful quarter," said Lawrence Cohn, an analyst at Ryan, Beck & Co. "But at companies that produce these kinds of results, it becomes difficult to predict" trends.

For its part, New York-based Chase said strong growth across its three main businesses is expected to continue through 1999. "We are comfortable with our performance going forward," chief financial officer Dina Dublon said in a telephone interview.

The share prices of the companies closed as follows: Chase $83, down $2; Bank One $58.8125, down 43.75 cents; Wells $42.25, up $1.125; Mellon, $70.9375, down 6.25 cents; and State Street $84.875, up 43.75 cents.

Chase, the nation's third-largest banking company, reported earnings per share of $1.32, which beat the analysts' consensus estimate by 7 cents.

In the first quarter last year, Chase took a $521 million pretax restructuring charge. Factoring out that charge, profits this year rose 11%.

Ms. Dublon said the performance "reflects the demonstrated strength of the new Chase and the diversity of its franchise."

Analysts said they had been looking for a strong quarter from the New York banking company after J.P. Morgan & Co. and Citigroup reported strong returns in their capital markets businesses for the first three months of 1999.

Favorable market conditions, double-digit revenue growth, progress on merger integration, and solid asset quality have contributed to the surprisingly good showings.

Chase's noninterest revenues jumped 20%, to $2.9 billion.

Revenues from wholesale banking activities rose 8%, to $2.59 billion, and profits from those businesses rose 11%, to $844 million. Big gains in trading helped offset declines in other businesses.

Trading revenue, including interest income, rose 21%, to $837 million.

Chase also reported an 88% gain from the sale of securities during the quarter, to $156 million, and an 11% increase in venture capital investments, to $325 million.

Investment banking fees declined 12%, to $317 million, because of the overall market decline in leveraged financings.

Revenues from consumer banking activities rose 12%, to $2.16 billion, and profits from consumer operations rose 22%, to $350 million.

Chase's home finance unit had a 13% gain in revenues, to $272 million. Mortgage servicing fees jumped 14%, to $65 million, but higher origination volume was offset by a decline in the portfolio's net interest income and by higher expenses for technology investment.

Revenues from credit card operations rose 8%, to $1 billion. Trust and investment management fees rose 19%, to $414 million.

Global processing services, another Chase unit, had a 9% increase in revenues, to $728 million, but profits fell 4%, to $144 million. The business benefited from growth in U.S. and global custody operations, which was offset by technology spending.

Overall expenses rose 12%, to $2.9 billion, because of higher employee compensation costs and technology investments.

Bank One Corp.

Operating income, excluding merger-related charges and gains on the sale of branches and other operations, rose 15% at Chicago-based Bank One.

Earnings per share of 88 cents met analysts' estimates, but that did not include the special charges.

The nation's fourth-largest bank, with $250 billion of assets, took charges of $204 million related to last year's acquisition of First Chicago NBD Corp. Those were offset by a gain of $249 million from the sale of 51 branches in Indiana to Union Planters Corp., part of an antitrust divestiture associated with the merger.

The company also had a pretax gain of $111 million related to the sale of Bank One's portion of Electronic Payment Services Inc., an automated teller machine network operator.

Noninterest income grew 35% in the first quarter, including gains on sales. Without them, noninterest income was up 19% as result of credit card and market-driven revenues. Card revenue was $952 million, up 36% from a year earlier but down 12% from the fourth quarter.

Market-driven revenue, which includes trading, equity, and investment securities, reached $215 million, up 30% from last year's first quarter and 136% from the fourth quarter. Service charges on deposits were $690 million, a 5% rise from a year before.

Fiduciary and investment management fees were $179 million, a 10% decline.

Noninterest expense was $2.9 billion, a 21% jump. Excluding merger charges, expenses climbed 13%. Noninterest expense dropped 2% from the fourth quarter when merger charges are subtracted. The company estimated it saved $50 million in staff and marketing costs resulting from the acquisition of First Chicago.

Quarterly net interest income was $2.28 billion, flat compared with the year-earlier period. However, managed credit card loans, including those in securitized pools, increased 18% to $68.4 billion. Bank One is running neck-and-neck with Citigroup for the lead in card lending. Its First USA division added 2.9 million accounts in the first quarter.

Robert A. Rosholt, Bank One's chief financial officer, said the company is on track to meet expense and revenue goals related to the First Chicago merger. It sees expense cuts of $930 million, half of that this year.

Bank One has taken merger charges of $939 million in the past two quarters. More than $300 million in merger-related restructuring charges will be taken through the remainder of the year, Mr. Rosholt said.

"The composition of earnings looked a little bit weak to me," said Catherine Murray, an analyst with J.P. Morgan Securities. "They made estimates with the benefit of high market-related revenue."

Though a number of companies were beating estimates with market revenues, Bank One needed them to meet Wall Street expectations, she said.

Investors, Ms. Murray said, must "ask questions about strength in the core franchise. There are supposed to be significant improvements through the year. We'll have to wait and see in the coming quarters."

Ms. Murray said Bank One appeared to be on track with its merger integration and indicated strong loan growth in the first quarter.

Ms. Yates of A.G. Edwards, said expense control at the company was "going in the right direction. It appears they're positioning the company for the rest of the year."

Wells Fargo & Co.

San Francisco-based Wells beat analysts' per share estimate of 50 cents by 3 cents.

In its first full quarter after the Norwest deal, the $201 billion-asset Wells posted strong gains across many of its business lines, including a record 37% jump in residential mortgage income, to $69 million. Retail banking climbed 26%, to $673 million.

However, some areas, such as wholesale banking and consumer finance, remained relatively flat.

In an interview Tuesday, president and chief executive officer Richard M. Kovacevich said Wells benefited from its involvement in a diverse range of businesses.

"We always believe there are businesses that are doing well and those that aren't," Mr. Kovacevich said. "That's the value of diversity. If you're in everything, money will move to you as opposed to somewhere else."

Net income from wholesale banking, which includes corporate lending, capital markets, and commercial real estate, increased 3%, to $227 million. Average wholesale loans were steady at $33 billion.

Wells Fargo found it difficult to compete with other lenders more willing to make riskier loans, Mr. Kovacevich said. "It's very tough to grow corporate loans in an environment where people are not pricing for risk," he said.

Norwest Financial, the consumer and auto finance arm, also showed relatively lackluster results. Compared to the same period a year earlier, net income from this segment increased 4%, to $54 million. Average loans decreased 10%, to $9 billion.

But the lack of progress in commercial lending was more than offset by gains in other areas. Profits in the venture capital unit nearly doubled, to $112 million. Analysts said this was a major reason that the per-share consensus was exceeded.

The strength in community banking, which includes Wells Fargo's 2,866 retail branches, was driven in part by a renewed vigor in California operations, the core of the former Wells Fargo.

"The old Wells was pretty soft a year ago," said James R. Bradshaw, an analyst with Pacific Crest Securities in Portland, Ore. "We've been hearing anecdotal evidence that Wells is back in the West, and the numbers seem to suggest that this is indeed the case."

Mr. Kovacevich attributed much of the growth in community banking to high levels of cross-selling. "Referrals from corporate customers to personal customers and vice versa have been very strong," Mr. Kovacevich said. "We've got a lot of momentum in community banking, particularly on the fee-based side."

Revenue-generating initiatives undertaken in the old Norwest retail bank started paying off in the first quarter, leading to a five-point improvement in the efficiency ratio, to 58.7%.

"Our revenue is growing much faster than our expenses, and much of that improvement is on the community banking side," Mr. Kovacevich said.

Analysts pointed to average core deposits, which grew by $323 million to $128 billion during the quarter, as a sign that the merger is progressing well.

"This was an excellent quarter that beat a lot of expectations," said R. Jay Tejera, an analyst with Ragen MacKenzie Inc., Seattle. "This should put to rest any concerns about how the integration is progressing."

Mr. Kovacevich said he expects financial results from the second quarter to be as solid as the first.

"Barring major changes in the economy, the pattern will be similar," he said. "We're off to a good start."

Mellon Bank Corp.

Excluding one-time gains from sales of businesses, Pittsburgh-based Mellon's earnings rose 12%. Without the special items, earnings per share of 87 cents were a penny better than the consensus.

Like Bank One, Mellon booked revenue from the sale of Electronic Payment Services. It also sold off credit cards. The divestitures accounted for $83 million in gains. The company also took a one-time pretax charge of $43 million related to an accounting change on the public offering of a mutual fund.

Mellon, which gets 68% of revenues from fee-based businesses such as asset management and institutional trust, said fees grew 13%, to $789 million.

"The trust and investment business had very strong growth," Martin G. McGuinn, Mellon's chairman and chief executive officer, said in a conference call with reporters. "We're pleased that our strategy overall is working."

The quarter, he added, "shows that we have some very strong momentum."

Investment management income, which includes mutual funds and asset management for consumers, reached $278 million, a 38% rise. Administration and custody income, which includes institutional trust, was $136 million, up 3%.

Net interest income was $369 million, a 1% gain. Operating expenses of $780 million increased 9%. Costs were largely related to personnel.

"Revenue growth appears to be impressive, driven by continued growth in trust and investment management fees," said Ms. Murray of J.P. Morgan Securities. "Operating expense growth remains low, and asset quality is not an issue."

State Street Corp.

At Boston-based State Street, earnings per share of 74 cents beat the consensus by two pennies.

The $49.7 billion-asset company, which specializes in processing, trust, asset management, and related services for institutional investors, has extended its annual revenue target of 12.5% through the year 2010. That would "more than triple revenue by the end of the next decade," said Marshall N. Carter, chairman and chief executive officer.

Fee revenue rose 19%, to $552 million, and made up 74% of all revenues. Fiduciary compensation rose 18%, to $408 million. Fees from investment management rose 25%, to $133 million.

Revenues from foreign exchange trading jumped 25%, to $94 million. Fees from servicing and processing rose 16%, to $45 million.

A assets under administration surpassed the $5 trillion mark at quarter's end. Assets under management totaled $525 billion. +++

Wells Fargo & Co.

San Francisco

Dollar amounts in millions (except per share) First Quarter 1Q99 1Q98

Net income $884.0 $0684.0

Per share 0.53 0.41

ROA 1.80% 1.51%

ROE 17.33% 14.20%

Net interest margin 5.58% 5.87%

Net interest income 2,281.0 2,210.0

Noninterest income 1,727.0 1,533.0

Noninterest expense 2,342.0 2,296.0

Loss provision 270.0 305.0

Net chargeoffs 273.0 310.0

Balance Sheet 3/31/99 3/31/98

Assets $201,430.0 $190,853.0

Deposits 132,340.0 130,148.0

Loans 104,947.0 102,075.0

Reserve/nonp. loans 449% 431%

Nonperf. loans/loans 0.67% 0.70%

Nonperf. assets/assets 0.46% 0.49%

Nonperf. assets/loans + OREO 0.87% 0.91%

Leverage cap. ratio 6.75% 6.74%

Tier 1 cap. ratio 8.30% 8.19%

Tier 1+2 cap. ratio 11.05% 11.15%

State Street Corp.

Mellon Bank Corp.

Pittsburgh

Dollar amounts in millions (except per share) First Quarter 1Q99 1Q98

Net income $254.0 $206.0

Per share 0.96 0.78

ROA 2.03% 1.89%

ROE 23.05% 21.60%

Net interest margin 3.78% 4.06%

Net interest income 371.0 367.0

Noninterest income 872.0 698.0

Noninterest expense 780.0 716.0

Loss provision 15.0 15.0

Net chargeoffs 17.0 18.0

Balance Sheet 3/31/99 3/31/98

Assets $49,384.0 $47,414.0

Deposits 33,348.0 33,096.0

Loans 30,554.0 30,343.0

Reserve/nonp. loans 323% 349%

Nonperf. loans/loans 0.41% 0.47%

Nonperf. assets/assets 0.33% 0.40%

Nonperf. assets/loans + OREO 0.53% 0.63%

Leverage cap. ratio 6.60%* 7.04%

Tier 1 cap. ratio 6.80%* 6.80%

Tier 1+2 cap. ratio 11.10%* 11.28%

*Estimated

Chase Manhattan Corp.

New York

Dollar amounts in millions (except per share) First Quarter 1Q99 1Q98

Net income $1,173.0 $725.0

Per share 1.32 0.80

ROA 1.30% 0.78%

ROE 20.60% 13.80%

Net interest margin 3.08% 2.92%

Net interest income 2,208.0 2,169.0

Noninterest income 2,940.0 2,459.0

Noninterest expense 2,945.0 3,141.0

Loss provision 381.0 332.0

Net chargeoffs 380.0 344.0

Balance Sheet 3/31/99 3/31/98

Assets $361,258.0 $365,715.0

Deposits 207,641.0 196,096.0

Loans 169,297.0 164,322.0

Reserve/nonp. loans 234% 311%

Nonperf. loans/loans 0.88% 0.69%

Nonperf. assets/assets 0.46% 0.37%

Nonperf. assets/loans + OREO 0.83% 0.66%

Leverage cap. ratio 6.60%* 6.00%

Tier 1 cap. ratio 8.40%* 8.10%

Tier 1+2 cap. ratio 12.20%* 11.90%

* Estimated

Bank One Corp.

Chicago

Dollar amounts in millions (except per share) First Quarter 1Q99 1Q98

Net income $1,151.0 $933.0

Per share 0.96 0.78

ROA 1.85% 1.59%

ROE 22.90% 20.30%

Net interest margin 4.30% 4.54%

Net interest income 2,309.0 2,320.0

Noninterest income 2,590.0 1,196.0

Noninterest expense 2,941.0 2,431.0

Loss provision 281.0 391.0

Net chargeoffs 281.0 414.0

Balance Sheet 3/31/99 3/31/98

Assets $250,402.0 $240,560.0

Deposits 153,699.0 153,817.0

Loans 154,850.0 158,387.0

Reserve/nonp. loans 220% 385%

Nonperf. loans/loans 0.67% 0.46%

Nonperf. assets/assets 0.45% 0.50%

Nonperf. assets/loans + OREO 0.74% 0.33%

Leverage cap. ratio 8.00% 7.90%

Tier 1 cap. ratio 8.10% 8.30%

Tier 1+2 cap. ratio 11.60% 12.50%

Wells Fargo & Co.

State Street Corp.

Boston

Dollar amounts in millions (except per share) First Quarter 1Q99 1Q98

Net income $121.0 $106.0

Per share 0.74 0.64

ROA 0.96% 1.07%

ROE 20.80% 21.00%

Net interest margin 1.76% 2.09%

Net interest income 194.0 176.0

Noninterest income 552.0 463.0

Noninterest expense 557.0 474.0

Loss provision 4.0 5.0

Net chargeoffs 3.0 (1.0)

Balance Sheet 3/31/99 3/31/98

Assets $49,750.0 $39,010.0

Deposits 28,065.0 23,593.0

Loans 6,244.0 5,591.0

Reserve/nonp. loans 424% 6493%

Nonperf. loans/loans 0.32% 0.02%

Nonperf. assets/assets 0.05% 0.01%

Nonperf. assets/loans + OREO 0.37% 0.06%

Leverage cap. ratio 5.50% 5.90%

Tier 1 cap. ratio 14.40% 13.60%

Tier 1+2 cap. ratio 14.60% 13.70% ===

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