Bouncing back from a year of struggling to control expenses and trading losses, J.P. Morgan & Co. reported that first-quarter profits more than doubled to $600 million.

The nation's fifth-largest banking company turned in record earnings per share of $3.01, far outstripping analysts' consensus estimates of $1.73.

Speaking at the bank's annual meeting Wednesday, chairman and chief executive officer Douglas A. Warner 3d credited a year-old restructuring program aimed at boosting efficiency and lifting revenues in high-growth client businesses.

"Our global markets business today is even stronger than a year ago," Mr. Warner said. "Because of this progress in our strategy, J.P. Morgan was well positioned to capitalize on the broad-based rebound of global markets in the first quarter."

Morgan led a group of banking companies that notched double-digit gains Wednesday.

Fleet Financial Group, which plans to acquire BankBoston Corp. in the fourth quarter, posted a 36% jump in net income, to $438 million. Quarterly earnings at U.S. Bancorp were up 12% to $367 million. Fee income helped Wachovia Corp. earn $243 million, a 25% gain, while SouthTrust Corp. credited mortgage banking for a 21% improvement, to $105 million.

"Sustained economic growth has countered what has historically been a seasonally weak quarter," said Carla D'Arista, an analyst with Friedman, Billings, Ramsey & Co. in Arlington, Va. Companies that have personal investment or investment banking businesses did particularly well.

J.P. Morgan & Co.

Analysts underestimated the impact of strong capital markets on bank earnings, particularly in Morgan's case, said Bradley Ball of Credit Suisse First Boston. The stock market is likely to cause further upside surprises as other banks heavily dependent on capital markets report profits this week, he added.

At $269 billion-asset Morgan, last year's market turbulence hindered efforts at restructuring, Mr. Warner said. "But we have been rewarded this year in markets that were more hospitable," he added.

The bank has been struggling to curtail expenses as it funnels investments into equity underwriting, a mergers advisory business, and asset management.

The strong showing in this quarter should take pressure off Morgan, which has been the subject of almost constant takeover speculation since late 1997.

"There's no doubt that these are the kind of results that give them more breathing room," said Lawrence Cohn, an analyst at Ryan Beck & Co.

The bank stressed that core operating expenses were down $100 million. However, if a $215 million restructuring charge taken in last year's first quarter is excluded, expenses grew 11%.

Still, the bank said it was on target to reduce expenses by $400 million this year, and some observers agreed. "They are showing genuine progress," said Mr. Cohn.

Total revenues were $2.5 billion, up 25% from the first quarter last year. Revenues from what the bank calls client-focused activities rose 32%, to $2.4 billion. Equity underwriting revenues more than doubled, to $288 million. Revenues from market-making for clients soared 91%, to $696 million.

Analysts said much of the gains in trading for clients came from favorable spreads on emerging market debt, and many doubted those revenues could be sustained in upcoming quarters.

Analysts said Morgan was able to take advantage of a unique situation with regard to its positions in Latin America. "They benefited from unusual conditions, especially in Brazil," Mr. Cohn said.

Meanwhile, revenues from proprietary activities sank 67%, to $97 million, the bank said. The decline included a $22 million loss from equity investments, reflecting writedowns of Brazilian securities.

Fleet Financial Group

Fleet's earnings per share of 72 cents beat the consensus by 3 cents. The year-earlier period included a $73 million pretax charge related to the Boston bank's acquisitions of Quick & Reilly Group and Advanta Corp.'s retail credit card portfolio.

Analysts said $106 billion-asset Fleet showed strong revenue momentum across the board, preparing well for its proposed acquisition of BankBoston later this year.

"They are positioning themselves for domination of a region that would be unprecedented," said Gerard Cassidy, an analyst at Tucker Anthony Inc.

Fee income rose 38% to $959 million and represented 48% of total revenues, the bank said. Gains came from a variety of businesses, including credit cards, brokerage and investment services, mortgages, and commercial banking.

Investment services revenues rose 23%, to $248 million. Record mortgage production of $13 billion led to a 159% increase in processing-related revenues, to $153 million. Credit card revenue more than doubled, to $141 million. Capital markets revenue increased 8%, to $149 million.

During the quarter, Fleet closed its purchase of Sanwa Business Credit, a New York leasing and asset-based lending company. The addition of Sanwa helped boost net interest income 11%, to $1 billion.

Nonperforming assets declined 25%, to $280 million. The provision for credit losses rose to $149 million from $92 million.

U.S. Bancorp

Minneapolis-based U.S. Bancorp said quarterly earnings grew 12% from a year earlier to $367 million. Excluding one-time charges, profits were up 5%. Operating earnings per share were 51 cents, meeting analysts' estimates.

"Our first quarter results reflect both the challenges and opportunities facing our company in 1999," said U.S. Bancorp chairman and chief executive officer John F. Grundhofer. The company's revenues were bruised by the loss of a portion of the U.S. government's purchasing card business, he noted.

As a result, U.S. Bancorp's credit card business, traditionally a high growth area for the company, earned $127 million, flat compared with a year earlier.

Noninterest income was $626 million, up 37%. Gains came largely from the bank's Piper Jaffray Cos. unit, in such areas as investment products fees and commissions, trading account profits and investment banking revenue. Noninterest expense rose 18.5% from a year earlier to $719 million. Net interest income was $783 million, up 4%.

U.S. Bancorp's profits could continue to drag until the $76 billion- asset banking company finds a revenue replacement for the government card business, analysts said. According to Ms. D'Arista of Friedman Billings, the partial loss of that business accounted for a $17.5 million decline in revenues from the fourth quarter.

"I don't think they have a revenue challenge," Ms. D'Arista said. "I think the challenge is offsetting a loss of a significant portion of a business."

Catherine Murray, an analyst with J.P. Morgan Securities, said U.S. Bancorp's asset quality deteriorated in the quarter. Net chargeoffs totaled $140 million, up 36%. The company attributed the higher writeoffs to one large commercial loan and to anticipated consumer loan losses.

Analysts said the commercial credit writeoff was related to U.S. Bancorp's part in a syndicated loan to troubled subprime lender United Companies Financial Corp. U.S. Bancorp declined to comment on the credit.

Wachovia Corp.

Fees from capital markets, electronic banking, and retail investment activities helped boost profits at Winston-Salem, N.C.-based Wachovia.

Per-share earnings of $1.18 matched the analysts' consensus. Operating income, which excludes a $36 million merger-related charge taken in the first quarter of 1998, rose nearly 12%.

"Wachovia delivered a real solid quarter," said David M. West, an analyst with Davenport & Co., Richmond, Va. "There were no major surprises and it was right in line with market expectations."

Fee income, which increased 18% to $333 million, accounted for 57% of revenue growth. Much of the lift came from capital markets and electronic banking activities, said Donald K. Truslow, Wachovia's treasurer and comptroller. Investment fee income, up 15% from the fourth quarter, to nearly $13 million, added to the gain.

The net interest margin also showed improvement, jumping to 4.41%, versus 4.21% in last year's first quarter.

"That figure was surprisingly strong," Mr. Truslow said in an interview.

Wachovia increased its loan loss provision by 8.8%, to $81 million. Net loan losses increased by 8.4%, to $80 million.

Growth in the bank's credit card portfolio accounted for the increase in Wachovia's provision. The bank bought $270 million in receivables from Wells Fargo & Co. in September, Mr. Truslow said.

"While we expect to profit well from the purchased balances, credit card portfolios naturally have higher losses," he added.

While Wachovia did not reap any financial gains from its April 1 acquisition of regional brokerage Interstate/Johnson Lane, Mr. Truslow said the bank is already taking advantage of the new cross-selling opportunities in capital markets and personal financial services.

"We are already winning some business that Wachovia could not have landed on its own," he said.

Acquisition charges of $15 million to $20 million will be split between the second and third quarters of this year, Mr. Truslow added.

SouthTrust Corp.

Birmingham, Ala.-based SouthTrust beat per-share consensus estimates of 61 cents by a penny.

"We will continue to focus on consistently increasing earnings per share and return on equity by emphasizing cost control, noninterest income, and margin income improvements," said SouthTrust chairman and chief executive Wallace D. Malone Jr.

Fees from mortgage banking operations jumped 71% to $15 million, the bank said. Deposit account fees increased 27%, to nearly $47 million. Overall, noninterest income rose 26%, to $111 million.

Analysts said they were pleased to see an improvement in efficiency at the $39 billion-asset banking company, which they attributed in part to the acquisition last year of the Florida operations of the former First of America Bank Corp. In the first quarter, SouthTrust's efficiency ratio improved to 56.32%, from 58.79%.

"Their expense line was lower than what we were looking for," said David C. Stumpf, an analyst with A.G. Edwards & Sons Inc., St. Louis. "They are getting some efficiencies out of last year's acquisition."

Total assets at the bank grew 19%. Deposits rose 20%, to $24.6 billion. +++

Wachovia Corp.

Winston-Salem, N.C.

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $243.2 $195.3

Per share 1.18 0.93

ROA 1.51% 1.24%

ROE 18.31% 15.29%

Net interest margin 4.41% 4.21%

Net interest income 618.2 580.9

Noninterest income 333.5 286.9

Noninterest expense 492.2 494.2

Loss provision 80.6 74.1

Net chargeoffs 80.6 74.1

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

Assets $65,319.0 $65,125.0

Deposits 40,288.0 39,857.0

Loans 46,393.0 44,498.0

Reserve/nonp. loans 378.76% 447.48%

Nonperf. loans/loans 0.31% 0.27%

Nonperf. assets/assets 0.26% 0.23%

Nonperf. assets/loans + OREO 0.37% 0.33%

Leverage cap. ratio NA 8.91%

Tier 1 cap. ratio 7.70%* 8.20%

Tier 1+2 cap. ratio 11.40%* 10.80%

* Estimated

U.S. Bancorp

Minneapolis, Minn.

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $366.8 $328.5

Per share 0.50 0.44

ROA 1.98% 1.91%

ROE 24.40% 22.10%

Net interest margin 4.82% 4.98%

Net interest income 793.4 768.0

Noninterest income 626.3 458.5

Noninterest expense 718.8 605.6

Loss provision 117.0 90.0

Net chargeoffs 139.6 103.2

Efficiency ratio 50.60% 49.90%

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

Assets $76,110.0 $70,949.0

Deposits 48,672.0 48,558.0

Loans 58,636.0 53,973.0

Reserve/nonp. loans 324% 340%

Nonperf. loans/loans 0.51% 0.53%

Nonperf. assets/assets 0.43% 0.46%

Nonperf. assets/loans + OREO 0.55% 0.59%

Leverage cap. ratio 7.00% 7.70%

Tier 1 cap. ratio 6.60% 7.80%

Tier 1+2 cap. ratio 11.20% 11.90%

SouthTrust Corp.

Birmingham, Ala.

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $104.5 $86.5

Per share 0.62 0.54

ROA 1.11% 1.11%

ROE 15.40% 14.72%

Net interest margin 3.71% 3.82%

Net interest income 320.3 275.5

Noninterest income 110.5 86.0

Noninterest expense 242.6 212.5

Loss provision 30.4 17.9

Net chargeoffs 15.4 13.1

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

Assets $39,016.1 $32,697.6

Deposits 24,552.5 20,532.9

Loans 28,261.8 23,548.9

Reserve/nonp. loans 300.99% 253.74%

Nonperf. loans/loans 0.46% 0.56%

Nonperf. assets/assets 0.49% 0.60%

Nonperf. assets/loans + OREO 0.68% 0.83%

Leverage cap. ratio 5.99% 7.01%

Tier 1 cap. ratio 6.63%* 8.15%

Tier 1+2 cap. ratio 10.59%* 13.06%

* Estimated

J.P. Morgan & Co.

New York

Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $600.0 $237.0

Per share 3.01 1.15

ROA 0.90% 0.34%

ROE 22.30% 8.60%

Net interest margin 0.84% 0.68%

Net interest income 389.0 336.0

Noninterest income 2,102.0 1,661.0

Noninterest expense 1,567.0 1,632.0

Loss provision - -

Net chargeoffs 23.0 44.0

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

Assets $269,070.0 $259,942.0

Deposits 56,804.0 60,375.0

Loans 25,785.0 33,292.0

Reserve/nonp. loans 442.6% 551.2%

Nonperf. loans/loans 0.39% 0.24%

Nonperf. assets/assets 0.04% 0.03%

Nonperf. assets/loans + OREO - -

Leverage cap. ratio 4.40%* 4.00%

Tier 1 cap. ratio 8.10%* 7.50%

Tier 1+2 cap. ratio 12.10%* 11.10%

* Estimated

Fleet Financial Group


Dollar amounts in millions (except per share)

First Quarter 1Q99 1Q98

Net income $438.0 $323.0

Per share 0.72 0.53

ROA 1.63% 1.43%

ROE 19.28% 16.00%

Net interest margin 4.59% 4.75%

Net interest income 1,042.0 938.0

Noninterest income 959.0 695.0

Noninterest expense 1,125.0 997.0

Loss provision 149.0 92.0

Net chargeoffs 149.0 92.0

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

Assets $106,166.0 $97,687.0

Deposits 67,633.0 68,165.0

Loans 73,683.0 64,986.0

Reserve/nonp. loans 646% 441%

Nonperf. loans/loans 0.36% 0.54%

Nonperf. assets/assets 0.26% 0.38%

Nonperf. assets/loans + OREO 0.38% 0.57%

Leverage cap. ratio 7.08% 6.39%

Tier 1 cap. ratio 6.65% 6.39%

Tier 1+2 cap. ratio 10.97% 10.37% ===

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