Rising interest rates took their toll on PNC Bank Corp.'s earnings as the Pittsburgh-based bank joined six other institutions reporting third quarter results on Wednesday.
PNC BANK CORP.
Pittsburgh Dollar amounts in millions (except per share)THIRD QUARTER 3Q94 3Q93Net income $188 $218Per share 0.79 0.91ROA 1.20% 1.72%ROE 17.11% 21.52%Net interest margin 3.45% 3.93%Net interest income 503 468Noninterest income 231 264Noninterest expense 436 346Loss provision 10 50Net chargeoffs 16 34YEAR TO DATE 1994 1993Net income $582 $554Per share 2.44 2.33ROA 1.29% 1.55%ROE 18.00% 19.00%Net interest margin 3.57% 4.01%Net interest income 1,510 1,398Noninterest income 718 739Noninterest expense 1,281 1,078Loss provision 60 165Net chargeoffs 67 130BALANCE SHEET 9/30/94 9/30/93Assets $64,004 $52,280Deposits 33,569 28,266Loans 35,70027,385Reserve/nonp. loans 281.35% 223.87%Nonperf. loans/loans 1.03% 1.53%Nonperf. asset/asset 0.80% 1.19%Leverage cap. ratio 6.82% 8.10%Tier 1 cap. ratio 8.70%(*) 10.72%Tier 1+2 cap. ratio 11.50%(*) 13.45% (*)estimate
Securities losses caused PNC Bank Corp.'s earnings to drop 13.6% to $188 million, or 79 cents a share, from $217.7 million, or 91 cents a share, for the same period a year ago.
Executives at the Pittsburghbased bank are "repositioning their balance sheet to reduce their liability sensitivity in a rising interest rate environment," explained Merrill Lynch's Sandra Flannigan.
The $64 billion-asset bank said earnings would have jumped 27% to $46.2 million had it not suffered securities losses.
In New England, Fleet Financial Group saw a 29% increase in profits to $164 million, or $1.01 a share. The jump was fueled by loan growth and was consistent with the bank's preearnings announcement last month.FLEET FINANCIAL GROUPProvidenceDollar amounts in millions (except per share)THIRD QUARTER 3Q94 3Q93Net income $163.9 $127.1Per share 1.01 0.78ROA 1.30% 1.09%ROE 20.08% 16.37%Net interest margin 4.45% 5.08%Net interest income 504.7 530.7Noninterest income 287.6 445.2Noninterest expense 501.5 687.2Loss provision 10.6 60.5Net chargeoffs 18.7 70.7YEAR TO DATE 1994 1993Net income $447.7 $352.0Per share 2.70 2.16ROA 1.22% 1.03%ROE 17.87% 15.76%Net interest margin 4.62% 5.06%Net interest income 1,529.2 1,561.9Noninterest income 863.3 1,146.2Noninterest expense 1,566.2 1,871.8Loss provision 45.0 215.4Net chargeoffs 71.6 222.1BALANCE SHEET 9/30/94 9/30/93Assets $46,988.1 $46,919.6Deposits 33,611.6 31,081.9Loans 27,047.6 26,274.6Reserve/nonp.loans 226.51% 179.64%Nonperf. loans/loans 1.58% 2.15%Nonperf, asset/asset 1.12% 1.57%Leverage cap. ratio 1.94% 2.78%Tier 1 cap. ratio 11.5% 11.6%Tier 1+2 cap. ratio 16.2% 16.5%
"Growth in both commercial and consumer loans continues to be encouraging as average loans and leases increased 10% on an annualized basis compared to the previous quarter," said chairman and chief executive officer Terrence Murray.
Earnings at the $47 billionasset bank, which is based in Providence, were also fueled by ongoing expense reductions and improved asset quality.
Third-quarter non interest expense dropped $61 million or 11% year over year to $502 million. Nonperforming assets dropped 29% to $526 million from $736 million in the third-quarter last year.
In other Pennsylvania news, Philadelphia-based CoreStates Financial Corp. posted net income of $104 million, or 74 cents a share, up 12% from $96 million, or 66 cents a share, in last year's corresponding quarter.
Growth was powered by expense reductions, but "revenue is quite disappointing," said Morgan Stanley's Dennis Shea. The $27 billion-asset bank's feebased revenue remained flat, hovering at about $106 million.
Noninterest income stagnated as well, dropping slightly to $421 million at Sept. 30 from $426 million for last year's third-quarter. The bank blamed the sluggish showing on one-time restructuring charges related to an internal reorganization, and two thirdquarter acquisitions.
In New Jersey, UJB Financial Corp. surprised analysts with a net income of $38.6 million, a whopping 197% increase over the $13 million in profits it reported a year ago.
Effective cost cutting, including a 17% drop in noninterest expense to $125.9 million, was primarily responsible for the boost.
Loan growth at the Princeton-based bank was another factor. Total loans at the end of Sept. 30 were $9.6 billion, up 8.5% from the same period a year ago. Commercial loans at the $15.5 billion-asset bank jumped 6.1%, to $4.6 billion. Mortgage loans rose 12.7% to $2.8 billion.
"A lot of their peers are not showing that kind of growth," said Wheat First, Butcher & Singer's Merrill Ross.
Edison, N.J.-based Midlantic Corp. reported net income of $76 million, or $1.40 a share, up 63% over the prior year's $47 million, or 86 cents a share. The bank credited a decline in expenses and nonperforming assets, together with a spurt in revenue, for the increase.
Midlantic, with $13.3 billion of assets, cut costs enough to lower its efficiency ratio 7 basis points to 57% in the third quarter. "The best banks in the country are trying to get down to 50% and Midlantic is well on its way," said Elizabeth Summers of Ryan Beck & Co.
Nonperforming assets dropped from about $500 million in the second quarter to about $360 million in the third quarter, a significant decline, Ms. Summers noted.
Meanwhile, the Summit Bancorp in Chatham, N.J. reported a loss of $18.5 million for the third quarter, reflecting one-time merger charges.
The bank said that its income excluding those charges hit $15.4 million, 31% greater than the $11.8 million than in the third quarter of 1993.
Wyomissing, Pa.-based Sovereign Bancorp posted $10.9 million for the quarter, up 30% from the $8.4 million earned a year ago. The bank said mortgage loan originations grew and it reduced expenses.