Big trading and investment gains, soaring fee income, and generally improved credit quality combined to boost earnings at large banks that unveiled second-quarter results Thursday.

Despite market jitters about pressure on interest rate spreads, several companies also continued to enjoy interest-related gains.

J.P. Morgan & Co., the largest bank reporting on Thursday, booked spectacular trading revenues of $520 million between April 1 and June 30 en route to a $431 million quarterly gain.

First Union Corp., the nation's ninth-largest bank company, with $72 billion of assets, said profits soared 80% to $221 million on big profits from its venture capital investments.

Minnesota-based Norwest Corp., the nation's 14th-biggest bank company, pocketed $132 million of mortgage banking revenues and had overall income of $311.3 million to boost its quarter.

In recession-weary New Jersey, Midlantic Corp. relied on rising interest margins, declining credit costs, and new accounting rules to report a 400% jump in profits to $40.9 million.

NORTHEAST

Exceptional trading profits fueled J.P. Morgan & Co., which reported net income of $431 million in its second quarter, up 33% from $325 million last year.

The results, which translated into $2.12 a share, far exceeded Wall Street's expectations. A consensus of 21 analysts reporting to First Call Corp. had forecast profits of $ 1.53 a share for the nation's fourth-largest bank company.

In afternoon trading Thursday, Morgan's stock rose $1.50 to $71.625 a share.

Analysts said investors remain concerned about Morgan's ability to sustain strong trading results. Its trading profits jumped 82% from a year earlier.

"The skeptics would say the monster trading result means volatile earnings," said Judah S. Kraushaar, an analyst at Merrill Lynch & Co. "But it's more of a reflection of getting a payback on significant investments made over the past couple of years." Morgan took $98 million of investment securities gains during the quarter. But, excluding the one-time profit and the trading results, revenue rose 9% over the year-earlier period, according to Mr. Kraushaar.

Investment management fees and operational services fees soared 22% over the year-earlier period while credit-related fees jumped 16%. Morgan said almost half of its $115 million in corporate finance fees came from underwriting securities. Expenses - a persistent source of criticism from analysts - remained high at $866 million, up 17% from the year-earlier quarter. But analysts seem unperturbed in the wake of the strong earnings.

"With revenues up 21%, I'm not concerned," said Raphael Soifer, an analyst at Brown Brothers Harriman & Co., who raised his 1993 estimate for Morgan after the earings report to $7.00 a share from $6.35. "Most expenses relate to the cost of doing more business." For the second consecutive quarter, Morgan did not make a provision for credit losses.

Keycorp, based in Albany, N.Y., said profits rose 31.9% to $99.9 million, or 95 cents a share. Though loan growth was modest, strong fee income and improved credit quality spurred profits.

Results were roughly in line with analysts' estimates. In late trading Thursday, the company's stock rose 62.5 cents to $40.375.

Keycorp said that loans, excluding acquisitions, rose 5.5% from last year.

"We still expect internal growth for Keycorp as a whole to approximate 5% for all of 1993," said William H. Dougherty, the chief financial officer and group executive vice president of Keycorp, adding that loan growth could hit 14% through acquisitions.

Keycorp's net yield on average earning assets dropped to 5.34% from 5.38% in the first quarter. But fee income - led by $28.7 million of mortgage banking revenues - soared 23% from the first three months of 1993.

Edison, N.J.-based Midlantic Corp. surprised analysts with its strong report.

Vastly improved credit quality, wider interest spreads, and gains related to tax accounting spurred profits. Midlantic's earings of 78 cents a share almost tripled the consensus estimate of 28 cents compiled by Zacks Investment Research Co., Chicago.

"No one expected them to be this far along" in resolving credit problems, said Jerome Baron, an analyst at Sherwood Securities. "They [could] begin to look like a normal bank in a few quarters."

Total nonperforming assets at Midlantic, which $13.8 billion of assets, fell 11% during the quarter as the company accelerated its bulk sales of nonperforming loans.

The company, which also recognized a $17 million tax-related gain, widened the spreads between its cost of funding and investment as its net interest margin rose 36 basis points to 4.12%.

Midlantic shares rose l2.5 cents to $21.625.

Elsewhere in New Jersey, UJB Financial Corp. recorded a 118% rise in profits to $22.4 million, or 43 cents a share, on target with analysts' expectations. The company's stock gained 25 cents to $25.25.

National Westminster Bancorp said profits rose 96% to $69.8 million. The Jersey City-based subsidiary of the giant British bank company said $14.5 million of the gain came from adoption of new accounting rules.

Officials at UJB, which has $13.8 billion of assets, said they continued to reduce nonperforming loans while enjoying a moderate improvement in spread and fee income. "We expect the negative effect on earnings from nonperforming loans and other owned real estate will continue to diminish," said T. Joseph Semrod, chairman and chief executive officer of New Jersey's third-largest bank.

SOUTHEAST

Southeastern banks issued another round of strong earnings reports, citing strengthened credit quality, higher fee income, and tight expense control. But most banks suffered slight declines in their net interest margin from the first quarter.

Merchant banking income helped First Union report earnings of $1.32 a share, well above analysts' expectations. The company had previously forecast gains of $1.15 to $1.20 a share, but on Thursday it said that gains from its equity investments in companies added $44 million, or 16 cents a share.

The Charlotte-based company saw its stock price rise 62.5 cents Thursday afternoon to S46 a share.

First Union recorded a 15% gain in noninterest income from 12 months earlier to $305.4 million. Its loan-loss provision fell 48% to $61 million.

Although the company's net interest income rose 12% during the quarter, but its net interest margin fell 8 basis points from three months earlier to 4.92%.

Despite a recent flurry of acquisitions, which added more than $20 billion in assets during the past year, First Union's noninterest expenses rose a modest 5% to $591 million from the year-earlier quarter.

The company also is experiencing an uptick in loan demand. Excluding acquisition-related assets, First Union added about $750 million in new loans during the second quarter. Malcolm T. Murray Jr., the bank's chief credit officer, said demand has been strong in North Carolina, Florida, and Atlanta.

Elsewhere in the southeast, Crestar Financial Corp. said it doubled its quarterly earnings to $33.7 million over the year-earlier quarter. The Richmond-based company has $13.2 billion of assets. Its shares fell $1.25 to $42.125.

First Tennessee National Corp., which has $9 billion of assets, reported $30.3 million in net income, up 16.4% from the second quarter of 1992. In New Orleans, First Commerce Corp., with assets of $6 billion, saw earnings crest 40% to $24.7 million from the previous year. And Birmingham, Ala.-based Central Bancshares of the South netted $22.2 million, an 18% for the company, which has $7 billion of assets.

All the companies but Crestar experienced a slight shrinkage in their net interest margin.

MIDWEST

Norwest Corp., the nation's 14th-largest bank company, boasted record quarterly gains while taking several nonrecurring charges to clean up its balance sheet.

The company's profit of $161.1 million, or 52 cents a share, slightly exceeded analysts' estimates. Norwest's shares rose 25 cents to $ 26.75 in late trading Thursday.

Norwest, which has $47.8 billion of assets, said all its business units performed "at or above expectations," led by very strong mortgage banking profits of $23 million. Noninterest income rose 38.6% from the year-earlier quarter and almost 22% from the first three months of the year.

The company's core bank earnings rose 16.2% over 1992's second quarter.

The midwestern giant accelerated amortization of credit card premiums and mortgage servicing rights during the quarter while boosting writeoffs of acquistion-related goodwill.

"They have the capacity to absorb these charges and still report strong earnings," said Henry C. Dickson, an analyst at Smith Barney, Harris Upham & Co.

Norwest's net interest margin dipped slightly since the first quarter because of lower yields on earning assets.

Credit quality remained strong. The company's loss provision inched up to $39.4 million from $37.2 million in the first quarter, but nonperforming assets declined.

In Cleveland, National City Corp. attributed its healthy quarter to strong progress in improving asset quality, expanding net interest margin and loan demand, and higher fee income.

The company shaved its nonperforming assets by $61 million during the quarter to $268 million - its ninth quarterly decline. The decline included a $38 million decrease in foreclosed real estate assets.

Loans increased 5% from the year-earlier period. "They have demonstrated they are a good solid performer, and hoping people will recognize it," said Mr. Dickson.

National City's profit of $102.5 million, or $1.22 a share, was in line with analysts' expectations. Its stock closed unchanged at $53 a share.

In Michigan, NBD Bancorp reported a 35% jump in earnings that translated into 76 cents a share, above analysts' expectations. In the year-earlier period, the Detroit company took a $12 million charge related to its purchase of Indiana's Summcorp and a $37 million special charge for an accounting change.

Nevertheless. NBD defied the trend of declining margins. Its net income jumped 5% from last year to $20.2 million, while its interest margin widened 17 basis points from one year earlier and 5 basis points from the first quarter.

NBD, the nation's 16th-largest bank, with $40.4 billion of assets, reduced its provision to $35.1 million from $40 million in the first quarter and $49.9 million one year earlier. Charge-offs fell to $32.8 million from $38.7 million in the first three months of 1993 and $44.6 million one year earlier.

The company's shares fell 25 cents to $32.875 on Thursday. Also, in Michigan. Old Kent Financial Corp. said earnings rose 18% to $33.4 million, citing strong interest margins, growing mortgage lending, and improved asset quality.

In Chicago Continental Bank Corp. exceeded analysts' expectations with its second-quarter profit of $61 million, or 95 cents a share. The results were up 20% from the year-earlier period.

The company fueled profits with a fivefold increase in trading gains, the sale of investment securities, and a credit for income taxes of $7 million. Total revenues at Continental, which focuses on business and corporate banking, fell slightly from the first quarter, but credit quality generally improved.

The company's stock lost 25 cents to $23.125 Thursday.

"You'd like to see revenues a little stronger, but they're going in the right direction," said Mr. Dickson.

Continental, which has $22.4 billion of assets, said nonperforming assets fell $106 million during the quarter to $768 million.

However, it said about 45% of its residential real estate assets - including almost three-quarters of its $500 million portfolio in California - were nonperforming. Continental's provision against future loan losses rose to $35 million from $25 million in the year-earlier period but declined from $56 million in the first quarter. Chargeoffs soared to $67 million from $21 million in the first quarter.

WEST

Oregon's U.S. Bancorp and Idaho's West One Bancorp reported solid earnings for the second quarter on Thursday. And in Southern California, City National Corp. returned to profitability.

U.S. Bancorp earned $63.6 million, up 19.3% from a year ago. West One Bancorp. based in Boise, netted $20.8 million, a 36% increase over last year's second quarter.

City National Corp. reported net income of $10.9 million, or 30 cents a share, compared with a $62.6 million loss for the same period last year. The most recent quarter was boosted by a $7.1 million gain from the sale of the company's data processing unit and a $3 million addition from sale of $74 million in equity loans. Earnings from continuing operations equaled $800,000.

Shares of U.S. Bancorp rose 50 cents to $25.875. West One gained 25 cents to $50.

U.S. Bancorp, which has $20.8 billion of assets, signaled its results to analysts several weeks ago but came in about 9% higher than the analysts' consensus forecast. The company's net interest margin widened by 13 basis points to 5.33%, due mainly to lower rates on consumer deposits.

Its earnings translated into a return on assets of 1.24% and a return on equity of 15.81%.

West One's second-quarter ROA was 1.15% and its ROE was 16.16%. It and U.S. Bancorp benefited from loan growth and gains in noninterest income.

U.S. Bancorp said it reaped large gains in deposit fees and income from venture capital investments. But mortgage income was down sharply as the company wrote down the value of mortgage servicing rights to reflect high refinancing levels.

Expense levels remained high due partly to the cost of branch acquisitions in Northern California.

West One's record profits reflected a 39% jump in loan volume from a year ago, due mainly to the acquisition of some $837 million in loans from Bank-America Corp. Excluding the effect of that transaction, loans still grew a snappy 15% in the year. At the end of June, West One had $7.3 billion of assets.

City National continued to write off and sell problem credits. Nonperforming assets and assets held for sale totaled $184.4 million, down 6.4% in the quarter and 29.12% for the year. The company's assets fell to $2.9 billion, down 28.7% from a year ago.

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