NationsBank Corp. said it earned $762 million in the second quarter, an increase of 26%.

It was the biggest percentage advance among several major banking companies reporting Monday. Most others were in or near double digits, continuing the trend started last week by such superregionals as SunTrust Banks Inc. and First Union Corp.

Revenues moved ahead strongly, and expense controls were evident-most notably at NationsBank as a result of its consolidation with Boatmen's Bancshares Inc., acquired in January.

"I think we are seeing a new NationsBank," said Anthony Davis, an analyst at Dillon Read & Co. "They have become a company that is more disciplined in its approach to managing lines of business."

If there was a laggard Monday it was First Chicago NBD Corp., rising 5%, but even that had a favorable spin: Credit problems were not as bad as some analysts had feared, and the return on assets, return on equity, and efficiency ratio measurably improved. Operating expenses fell 1%.

The consumer portfolio trends at both First Chicago and Norwest Corp., which boosted quarterly earnings by 16%, were a "positive surprise," said Joseph Duwan, an analyst at Keefe, Bruyette & Woods Inc. "Consumer chargeoffs appear to be at a plateau if not declining. This has certainly been an area of investor concern."


The Charlotte, N.C.-based company increased its net income to $762 million from $605 million. Because of a 20% increase in average common shares, to more than 720 million, per-share income rose only five cents, to $1.05. But that was five cents better than the analysts' consensus.

Return on average common shareholders' equity was 15.25%, down from 18.00% in the 1996 second quarter, due primarily to the equity issued for the acquisition of St. Louis-based Boatmen's Bancshares.

The $240 billion-asset NationsBank said it had achieved $104 million in cost savings to date from the integration of Boatmen's operations and from other, ongoing consolidation of back-office operations.

The bank revised its cost-saving estimate from the Boatmen's integration to $600 million annually, up from $559 million, by the end of 1999.

Expenses rose 28% year-to-year, to $1.8 billion, but fell $12 million from the first quarter.

"They are doing what they said they would do on the cost side," said George Bicher, an analyst with Alex. Brown & Sons. "And they continue to get productivity gains out of the old bank."

Analysts also said NationsBank has been successful in implementing a new pricing strategy for loan and deposit products.

Net interest income was $2.02 billion, up 25% from a year earlier. With the Boatmen's acquisition, average loans increased 20%, and the net interest yield grew to 3.89% from 3.62%, the bank said.

NationsBank executives told analysts that they had better customer retention from Boatmen's than they had expected. Core deposits were down about 6% since the St. Louis bank was acquired, and many of the customers who left were unprofitable, analysts said.

NationsBank also said it retained more commercial business from the old Boatmen's than it had originally anticipated.

"That's a clear message that the Boatmen's deal has been successful," said Harold R. Schroeder, an analyst at Keefe, Bruyette & Woods. "In light of the Wells Fargo-First Interstate deal, (retention) was certainly on the back of everyone's mind."

(Wells previewed second-quarter earnings last week, saying they would be well below expectations. Merger-integration and customer service problems are contributing to its woes.)

NationsBank saw credit card chargeoffs grow to 6.26% of average receivables, from 4.26% a year earlier.

Noninterest income totaled $1.17 billion. Fees from asset management grew 54%, to $173 million. But investment banking revenues were especially pleasing to analysts-they were up 73%, to $114 million.

NationsBank, which in June agreed to acquire Montgomery Securities in San Francisco, said it had received 25 referrals for investment banking work since that announcement.

"The pipeline looks very full for them," said Mr. Schroeder.

Bank of New York

Net income at Bank of New York Co. rose 9%, to $269 million. Earnings per share of 67 cents beat the First Call analyst consensus by a penny.

Revenues were driven by fee businesses, particularly securities processing, which gained 18%, to $190 million.

"The processing business was right on track," said First Albany Corp. analyst Kevin T. Timmons. The bank "will continue to shift revenues and earnings away from traditional banking to processing and other fee income businesses."

Processing fees related to funds transfer, cash management, and trade finance grew 14%, to $59 million. Trust and investment management fee income rose 11%, to $44 million.

Bank of New York also had a 10% gain in securities trading, to $33 million. Analysts said the results were largely from the proceeds of the bank's sale of $72 million in State Street Corp. stock.

Overall, processing-related activities brought in $249 million in fees and contributed nearly 50% to the noninterest income of $489 million. But this total was down from $842 million last year as the result of a sale of two credit card portfolios that had $4.3 billion of receivables. The quality of Bank of New York's remaining $4.2 billion credit card portfolio stabilized, with net chargeoffs at 8.03%.

Expenses grew 2%, to $465 million.

First Chicago

First Chicago NBD Corp. said lower expenses, a slightly lower provision for credit card losses, and modest revenue growth contributed to the 5% boost in second-quarter income, to $378 million.

Earnings per share of $1.20 met analysts' estimates.

The $112.6 billion-asset company recorded a 2% increase in net interest income, to $951 million, attributable to expense reductions and slight loan growth.

Noninterest income was flat at $644 million. Fees were affected by lower profits in credit cards and the corporate bank, areas in which First Chicago has been downsizing. Noninterest expense was up 1%, to $825 million.

First Chicago has been dogged by rising credit card chargeoffs over the past year. It said the net chargeoff rate for managed card receivables was 7.7% in the second quarter, up slightly from 7.4% in the first quarter.

Mr. Duwan of Keefe Bruyette said analysts were expecting a much higher chargeoff rate-somewhere above 8%. "Investors have been very focused on the credit cards," Mr. Duwan said.

First Chicago made a $180 million provision for credit losses in the second quarter, down from $185 million a year ago and $187 million in the 1997 first quarter.

The purchase by First Chicago of 11 million shares of its stock in the quarter helped boost earnings per share by 11 cents, Mr. Duwan noted. The company has now bought back 26 million shares under a 40-million-share program announced in October.


Minneapolis-based Norwest Corp. cited both banking and mortgage gains in reporting a 16% income advance, $331.4 million, or 86 cents a share. The last figure equaled analysts' estimates.

Norwest, which emphasizes its diversification by reporting its banking, mortgage banking, and finance company earnings separately, said the banking piece was up 21% from the 1996 second quarter, to $230 million. Loan growth spurred net interest income to 9% growth, reaching nearly $1 billion in the last quarter.

Fee income rose 18% to $756.4 million, driven by gains in trust, insurance, securities, venture capital, and service charges on bank accounts.

Norwest Mortgage earned $35 million, up 15%, while the consumer finance unit Norwest Financial rose 2% to $66.4 million.

Credit Suisse First Boston analyst Michael Mayo said it was encouraging that Norwest Financial reported a decline in net chargeoffs for the second consecutive quarter-to 3.13% from 3.66% in the first quarter.

The consumer finance company's revenue has been growing grown at a slower rate than in previous years as Norwest has focused on its rising delinquencies. It said the number of consumer finance loans 60 days past due declined in the quarter to 3.69% from 3.76%.

Norwest Financial recently announced it agreed to buy Fidelity Acceptance Corp., a subprime auto finance company. Mr. Mayo said the conservatively managed Norwest Financial has done one of the best jobs in the consumer finance industry of keeping losses to a minimum.

Mr. Mayo noted that both Norwest and First Chicago have declined to say that consumer losses are near their peak, but he said news of declining losses at both companies is positive in the short term.

National City

Powered by fee income and expense controls, National City Corp. posted a healthy second-quarter gain of 11%, to $198.3 million.

Analysts said the Cleveland banking company's acquisition of Commonwealth United Mortgage of Houston helped drive a 13% rise in fee income, to $309.4 million.

"This was a strong quarter for mortgage banking," said Joseph K. Morford 3d, an analyst with Alex. Brown. "It helped National City post a solid quarter that was a little better than expected."

The earnings per share of 90 cents was one cent better than analysts' expectations.

The bank cited improvements in credit quality: Nonperforming assets of $157.4 million fell 17% over the year and represented 0.42% of loans and foreclosed real estate. Net chargeoffs declined by 5% to $33 million, or 0.36% of loans.

Overall noninterest expenses crept up 3% to $473.1 million.

"If you peel those numbers back, our banking unit costs are flat," explained Thomas A. Richlovsky, National City's senior vice president and treasurer. "The slight increase is driven by the fee-based part of our business, as expected."

Second-quarter gains in equity securities and venture capital offset $33.3 million of one-time costs related to putting National City's six Ohio banks under a single statewide charter. Norwest Corp. Minneapolis +++

Nationsbank Corp. Charlotte, N.C. Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $762.0 $605.0 Per share 1.05 1.00 ROA 1.27% 1.20% ROE 15.25% 18.00% Net interest margin 3.89% 3.62% Net interest income 2,017.0 1,611.0 Noninterest income 1,165.0 917.0 Noninterest expense 1,798.0 1,405.0 Loss provision 190.0 155.0 Net chargeoffs 184.0 157.0 Year to Date 1997 1996 Net income $1,471.0 $1,118.0 Per share 2.02 1.85 ROA 1.23% 1.09% ROE 14.60% 16.87% Net interest margin 3.86% 3.52% Net interest income 3,995.0 3,195.0 Noninterest income 2,278.0 1,802.0 Noninterest expense 3,608.0 2,917.0 Loss provision 380.0 310.0 Net chargeoffs 368.0 312.0 Balance Sheet 6/30/97 6/30/96 Assets $240,362.0 $192,308.0 Deposits 135,049.0 108,124.0 Loans 149,320.0 122,643.0 Reserve/nonp. loans 249.66% 268.34% Nonperf. loans/loans 0.75% 0.70% Nonperf. assets/assets 0.53% 0.52% Nonperf. assets/loans + OREO 0.84% 0.80% Leverage cap. ratio 6.05% 6.64% Tier 1 cap. ratio 6.83% 7.58% Tier 1+2 cap. ratio 11.32% 11.93%

Bank of New York Co. New York Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $269.0 $278.0 Per share 0.67 0.66 ROA 1.83% 2.05% ROE 21.84% 21.97% Net interest margin 4.08% 4.28% Net interest income 489.0 502.0 Noninterest income 489.0 842.0 Noninterest expense 465.0 456.0 Loss provision 60.0 425.0 Net chargeoffs 88.0 187.0 Year to Date 1997 1996 Net income $534.0 $521.0 Per share 1.31 1.23 ROA 2.02% 1.92% ROE 21.36% 20.40% Net interest margin 4.16% 4.39% Net interest income 986.0 1,024.0 Noninterest income 944.0 1,256.0 Noninterest expense 911.0 899.0 Loss provision 120.0 515.0 Net chargeoffs 181.0 283.0 Balance Sheet 6/30/97 6/30/96 Assets $61,575.0 $51,463.0 Deposits 43,834.0 35,462.0 Loans 39,044.0 35,523.0 Reserve/nonp. loans 411.0% 418.3% Nonperf. loans/loans 0.60% 0.70% Nonperf. assets/assets 0.40% 0.50% Nonperf. assets/loans + OREO 0.60% 0.70% Leverage cap. ratio 8.04% 7.76% Tier 1 cap. ratio 7.83% 7.98% Tier 1+2 cap. ratio 11.99% 12.93% Norwest Corp. Minneapolis Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $331.4 $285.4 Per share 0.86 0.76 ROA 1.61% 1.50% ROE 22.10% 22.10% Net interest margin 5.69% 5.54% Net interest income 1,011.6 924.5 Noninterest income 756.4 641.9 Noninterest expense 1,119.7 1,011.1 Loss provision 122.8 87.4 Net chargeoffs 114.8 83.9 Year to Date 1997 1996 Net income $653.3 $556.8 Per share 1.70 1.50 ROA 1.62% 1.50% ROE 22.40% 22.40% Net interest margin 5.66% 5.62% Net interest income 1,978.8 1,822.8 Noninterest income 1,441.0 1,194.7 Noninterest expense 2,161.2 1,954.3 Loss provision 231.8 175.2 Net chargeoffs 226.8 169.4 Balance Sheet 6/30/97 6/30/96 Assets $83,856.3 $77,849.3 Deposits 51,971.4 46,284.4 Loans 40,783.8 38,652.3 Reserve/nonp. loans 569.9% 549.7% Nonperf. loans/loans 0.46% 0.47% Nonperf. assets/assets 0.28% 0.29% Nonperf. assets/loans + OREO 0.57% 0.58% Leverage cap. ratio 6.33% 6.09% Tier 1 cap. ratio 8.96% 8.53% Tier 1+2 cap. ratio 10.73% 10.49%

National City Corp. Cleveland Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $198.3 $182.8 Per share 0.90 0.81 ROA 1.58% 1.51% ROE 18.80% 18.12% Net interest margin 4.31% 4.45% Net interest income 494.4 494.7 Noninterest income 309.4 273.2 Noninterest expense 506.4 531.3 Loss provision 36.2 37.4 Net chargeoffs 33.0 34.6 Year to Date 1997 1996 Net income $394.4 $359.7 Per share 1.77 1.60 ROA 1.59% 1.48% ROE 18.25% 17.97% Net interest margin 4.28% 4.41% Net interest income 971.8 975.5 Noninterest income 598.4 534.3 Noninterest expense 957.7 989.1 Loss provision 72.0 69.4

Net chargeoffs 65.6 65.6 Balance Sheet 6/30/97 6/30/96 Assets $52,027.1 $48,805.8 Deposits 35,574.2 34,696.3 Loans 37,290.2 35,122.9 Reserve/nonp. loans 509.07% 407.50% Nonperf. loans/loans 0.37% 0.50% Nonperf. assets/assets 0.30% 0.39% Nonperf. assets/loans + OREO 0.42% 0.54% Leverage cap. ratio 7.56% 7.85% Tier 1 cap. ratio 9.01% 10.13% Tier 1+2 cap. ratio 13.85% 15.00%

First Chicago NBD Corp.

Chicago Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $378.0 $361.0 Per share 1.20 1.09 ROA 1.40% 1.25% ROE 18.10% 17.40% Net interest margin 4.12% 3.74% Net interest income 951.0 935.0 Noninterest income 644.0 643.0 Noninterest expense 825.0 814.0 Loss provision 180.0 185.0 Net chargeoffs 180.0 153.0 Year to Date 1997 1996 Net income $758.0 $701.0 Per share 2.37 2.12 ROA 1.43% 1.19% ROE 17.90% 17.00% Net interest margin 4.12% 3.62% Net interest income 1,858.0 1,848.0 Noninterest income 1,323.0 1,269.0 Noninterest expense 1,625.0 1,642.0 Loss provision 367.0 360.0 Net chargeoffs 366.0 298.0 Balance Sheet 6/30/97 6/30/96 Assets $112,595.0 $113,714.0 Deposits 68,018.0 64,593.0 Loans 66,102.0 65,001.0 Reserve/nonp. loans 428% 402% Nonperf. loans/loans 0.50% 0.50% Nonperf. assets/assets 0.30% 0.30% Nonperf. assets/loans + OREO 0.50% 0.60% Leverage cap. ratio 8.30% 7.60% Tier 1 cap. ratio 8.50% 8.10% Tier 1+2 cap. ratio 12.30% 12.20% ===

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