For the first time since the asset-quality turmoil of the late 1980s and early 1990s, none of the largest 100 bank holding companies reported midyear losses, according to an American Banker survey.

Raking in $16.5 billion in the first six months of 1994, the nation's largest 100 banks boosted earnings 12.8% over the corresponding period in 1993 reflecting the industry's return to health.

But while banks continue to make profits, the survey shows that the earnings boom may have peaked. The nation's 100 top bank holding companies made more than four times as much money in the first six months of 1993 than they did this year. Last year's $14.6 billion midyear earnings were a 54.3% jump over the first six months of 1992.

In the throes of a national recession in 1990, 16 of the country's biggest banks reported midyear losses. But, as the industryemerged from its doldrums the number of poor performers steadily declined until only three reported losses in 1993's first six months.

Last year's losers were Michigan National Corp., Farmington Hills; Washington D.C,based Riggs National Corp., and National Community Banks Inc., formerly of Maywood, N.J.

Since then, National Community has been acquired by Bank of New York Co. - in August 1993 - and Riggs and Michigan National have returned to profitability.

Riggs, a $4.5 billion-asset bank, underwent a major restincluring last year, cutting 826 employees and dumping problem assets. The $311.8 million of nonperforming loans which were on the bank's books at midyear 1993 were down to $127.5 million by midyear 1994.

Riggs earned $18 million in 1994's first six months. Last year at the same time, the bank reported a $101 million loss.

Michigan National, a $10 billion asset-bank, turned a reported loss of $29 million at midyear 1993 to a gain of $82 million in the first six months of this year after launching its own restructuring campaign.

Gerard Cassidy, an analyst at Hancock Institutional Equity Services predicted that over the next two years earnings growth at the top bank holding companies would level off to between 5% and 10% per year.

As a case in point, the Federal Deposit Insurance Corp. reported last week that 1994's midyear earnings for the industry increased only 5.7% over the corresponding period last year.

For the last two years banks have relied on wide margins and improved asset quality for their profits.

"Over the next 24 months those two factors will not be present," Mr. Cassidy says.

For one thing, margins are getting squeezed.

Also, now that banks appear to have put their asset-quality troubles behind them, they will soon reach a point where they "will eventually have to go back to a normalized [loan-loss] provision," says Dennis Shea, an analyst at Morgan Stanley.

Mr. Shea contends that regulators forced banks to over reserve during the asset-quality crisis of the 1980s and 1990s. Since then, banks have been lowering their credit reserves as a way to increase profits.

If it weren't for the pressure of regulators, banks "would not have raised (reserves) as drastically as they were encouraged to. So, they wouldn't have had this bubble of reserves to run down," Mr. Shea said.

Whether regulators were right to do so or not, Mr. Shea said their measures impacted shareholders. The market will now become more volatile as investors scurry for banks that will sustain profits during the upcoming leveling off in earnings, he added.

In addition to a profitability drop, the American Banker survey found the pace of consolidation had not let up in the first half of 1994.

In just the first six months, the top 100 bank holding companies increased their assets by $393 billion, or 8%, to $2.96 trillion. In the corresponding period last year, those banks increased their assets by 5%, from $2.4 trillion to $2.6 trillion.

Half of the midyear-asset gains are attributable to an accountingrule change in the first quarter that compels banks to place derivative investments on the balance sheet. The other half of the increase resulted from acquisitions.

The top bank holding companies captured 60.6% of all bank assets, up from 57% in December of 1993.

The number of branches has also increased, reflecting that banks have yet to consolidate their acquisitions.

The largest banks owned 31,638 branches in the U.S. as of June 30, up from 30,959 in June of last year and 30,466 at Dec 31.

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