Backed by solid loan growth and lower credit costs, NationsBank reported second quarter earnings of $437 million, 43% higher than the year-ago period. NationsBank's better-than-expected performance came despite weakening profits from trading and securities.

On a per-share basis, Charlotte-based NationsBank earned $1.58 a share, 11 cents above analysts' consensus estimates as recorded by First Call.

"They've got good growth in net interest income coming with a much slower growth rate in expenses," said analyst Moshe Orenbuch, with Sanford C. Bernstein & Co. in New York. NationsBank enjoyed solid loan growth in the second quarter, like most of the other southeastern banks that have reported so far. Its loans and leases grew by $2.5 billion, or 11% annualized, to $94.6 billion from the first quarter, led by branch-based consumer lending.

But investor relations spokesman Rusty Page said NationsBank did not expect to maintain that momentum for the rest of the year.

Lower Tax Rate Helped

"We think that our loan growth, while robust, will be in the high-single-digit area for the year because we see runoff in the corporate portfolio," Mr. Page said. "We're Originating a lot of new corporate loans but we continue to syndicate them, and we continue to see paydowns and runoffs in that portfolio."

NationsBank also benefited from a lower tax rate in the second quarter, 33%, compared to 37% in the first quarter. Mr. Page said NationsBank had erred on the side of conservatism in the first quarter when it estimated its taxes for the year.

Offsetting some of these positive factors was a fall in both trading income fell by $35 million to $54 million, as calmer markets led to less demand for interest rate hedging by corporate customers. Securities gains fell by $11 million to $5 million during the same period.

Four Major Deals

Year-to-year comparisons, as usual, are difficult at NationsBank because of the need to account for acquisitions.

NationsBank has closed four major deals since the end of last year's second quarter, including the purchase of Baltimore-based MNC Financial Inc., Maryland's largest bank, and Chicago Research & Trading Ltd., an options trading company.

Noninterest income rose 31% to $629 million from the year-ago quarter. but this reflects trading fees and profits from Chicago Research & Trading. Excluding that and other acquisitions, NationsBank's increase in noninterest income was a more modest 7%.

On the other hand, acquisitions make NationsBank's expense growth appear worse than it is: up 20%, to $1.2 billion. But taking out the acquisitions, the gain was a more acceptable 2%.

Meanwhile, credit quality continues to improve. NationsBank was able to drop its loan-loss provision by 36% - to $70 million from $110 million in the year-ago quarter.

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