Minneapolis-based Norwest Corp. Wednesday said thirdquarter earnings rose 16.1% to $203 million, while three Midwest thrifts reported mixed results and Michigan National Corp. posted earnings of $110 million, a 307% increase.
NORWEST CORP. Minneapolis
Dollar amounts in millions (except per share)THIRD QUARTER 3Q94 3Q93Net income $203.0 $174.8Per share 0.61 0.53ROA 1.45% 1.35%ROE 21.1% 20.4%Net interest margin 5.76% 5.45%Net interest income 728.9 634.2Noninterest income 379.4 377.4Noninterest expense 760.5 741.9Loss provision 41.6 23.3Net chargeoffs 44.0 31.1YEAR TO DATE 1994 1993Net income $595.5 $502.0Per share 1.78 1.52ROA 1.46% 1.35%ROE 21.4% 20.3%Net interest margin 5.64% 5.54%Net interest income 2,090.7 1,874.6Noninterest income 1,200.4 1,148.2Noninterest expense 2,288.6 2,181.3Loss provision 101.6 100.8Net chargeoffs 120.6 114.5BALANCE SHEET 9/30/94 9/30/93Assets $56,565.4 $53,855.5Deposits 34,749.8 34,522.8Loans 31,075.0 27,886.5Reserve/nonp. loans 604.9% 311.9%Nonperf. loans/loans 0.42% 0.91%Nonperf. asset/asset 0.31% 0.63%Leverage cap. ratio 6.87% 6.79%Tier 1 cap. ratio 9.96% 9.98%Tier 1+2 cap. ratio 12.34% 12.54%
The $56.6 billion-asset Norwest reported healthy loan growth, a margin expansion, and efficiency gains, boosting profitability despite a $53 million pretax loss on the sale of securities.
Metropolitan Financial Corp. said its earnings slid 73.8% to $4.4 million as the Minneapolis thrift cleaned house in preparation to be acquired by First Bank System.
Charter One Financial Inc., a Cleveland-based savings and loan, said earnings rose 7.2% to $17.3 million. And FirstFed Michigan Corp., Detroit, lifted earnings 49% to $13.7 million.
Michigan National's results were fueled by special gains. Excluding nonrecurring items, the company said earnings totaled $20 million, up 76% from core results a year ago.
Norwest said year-ago results were restated to reflect the stockswap buyout of First United Bank Group Inc., Albuquerque.
Surging profitability in banking operations boosted results, Norwest said, as average loans and the net interest margin expanded. The banking group had return on average assets of 1.14%, up 6 basis points.
Acquisitions and cost-cutting in the mortgage banking unit lifted its return on average assets 74 basis points to 1.5%.
Norwest's flagship finance subsidiary posted an ROA of 3.91%, off 42 basis points. Rising funding costs cut the unit's net interest margin.
Reflecting the difficulties provoked by sharply rising rates, Norwest recorded a $52.8 million pretax loss on the disposition of certain securities held for sale. It also reported a $206.9 million unrealized loss in the same classification, still on the books as of Sept. 30.
The securities loss caught some analysts off guard but appeared not to upset the market. "Norwest showed earnings strength from top to bottom, and it used some of that strength to reposition its portfolio," said Dennis Shea, a banking analyst with Morgan Stanley & Co. in New York.
Norwest's venture capital unit posted a $16.2 million pretax gain, plus an additional $76.3 million of unrealized gains at quarter's end.
Metropolitan booked $9.5 million of after-tax charges for lawsuit settlements and merger expenses, as it prepared for a first quarter 1995 merger with First Bank System. In turn, Metropolitan's annualized return on assets fell 75 basis points to 0.22%, and the return on average equity fell 10.52 percentage points, to 3.5%.
The $8.1 billion-asset Metropolitan said acquisitions swelled earning assets and net interest income. A mortgage banking slowdown cut fee income, and overhead expenses rose. The loss provision doubled, but was still modest.
At Sept. 30, Metropolitan had an after-tax unrealized loss of $13.4 million on securities held for sale.
Charter One, a $5.8 billion-asset thrift holding company, said annualized returns equaled 1.19% on average assets, an 8 basis-point decline from a year ago. It also reported an 18.76% annualized return on average equity, up 36 basis points.
Securities gains and rising service fees helped boost noninterest income, Charter One said, while an expansion of loans and holdings of mortgage-backed securities lifted net interest income. Rising salary outlays boosted overhead expense. The loss provision was negligible.
Charter One said it finished the third quarter with a $50.2 million unrealized loss on securities held for sale.
FirstFed Michigan, an $8.4 billion-asset thrift, said annualized returns equaled 0.64% on average assets, an increase of 26 basis points from a year ago, and 12.27% on average equity, up 564 basis points.
This institution has been digging out from a failed hedging strategy enacted several years ago, incurring a sizable first-quarter loss as it closed out certain derivatives contracts.
The company still is saddled with $1.5 billion of interest rate swaps and Federal Home Loan Bank advances having a weighted average cost of 10.5%.