PNC Bank Corp. reported a fourth-quarter loss and full-year earnings decline Wednesday due to an expected $380 million after-tax charge for merger expenses and the sale of fixed-rate securities.
PNC reported a quarterly loss of $176 million, compared with a fourth- quarter profit of $106 million in 1994. Full-year earnings were $408 million, a 44% decline from 1994.
The $73 billion-asset Pittsburgh company took its fourth-quarter charge partially to cover the acquisition of Midlantic Corp. of New Jersey.
Analysts reacted with mixed emotions, most agreeing that PNC had done what it had to in taking losses on investments bought in 1994. Now, analysts say, they'll be watching what PNC does to cut costs at Midlantic and what other moves it makes to increase earnings in 1996.
"Nineteen ninety-five was not a good year for PNC, and they'll admit it," said James Schutz, an analyst at Chicago Corp. "The question is, 'What will they do?' A lot of people have a hold on (PNC) stock because of credibility problems."
Denis LaPlante, an analyst at Fox-Pitt Kelton, agreed. "This company has had a series of disappointing results," he said.
PNC ran into problems when rising interest rates drove down the value of fixed-rate securities it had bought in 1994. To alleviate the problem, the company sold $6 billion of securities and terminated interest rate swaps and caps. As a result, it shrank securities' proportion of its portfolio from about 40% to 23%.
"This clears the way for higher earnings in 1996," said Michael Mayo of Lehman Brothers. "On the other hand, book value declined by 14% from the third quarter to the fourth quarter."
Elsewhere, regional banks from the East and West coasts reported sharply varying quarterly results. Glendale, Calif.-based Glendale Federal Bank posted a net loss of $10.7 million, and First Maryland Bancorp., European American Bank, and Riggs National Bank announced moderate to strong profit improvement.
Glendale Federal's net loss for its second fiscal quarter compared with net earnings of $12.7 million in the same quarter of the previous year. The downturn stemmed mainly from a previously announced $23.8 million after-tax loss on the sale of a $2 billion portfolio of collateralized mortgage obligations and a $1.3 million loss on the sale of the bank's former headquarters.
Stephen J. Trafton, chairman and chief executive of the $14.6 billion- asset bank, said Glendale's underlying core earnings continued to improve as did net interest income, as a result of an 80-basis-point improvement in interest margins from the same period of 1994. Meanwhile, retail operations also posted an improvement in fee income.
Two foreign-owned banks reported improved earnings.
First Maryland, the $10.4 billion-asset, Baltimore-based unit of Allied Irish Banks PLC, posted a 10.5% increase in earnings for the fourth quarter, to $31.5 million. Earnings for the year rose 8.1%, to $120.2 million. First Maryland also said Wednesday that it has agreed to acquire 1st Washington Bancorp for $83.5 million, or $8.125 per share. 1st Washington, based in Herndon, Va., had assets of $801 million at Sept. 30.
European American Bank, the Uniondale, N.Y.-based unit of Holland's ABN Amro Holding, reported a 6% increase in fourth-quarter net, to $23.9 million, and a 23% profit increase for all of 1995, to $109.5 million. Total assets grew 24% during the year, to $8.5 billion.
Although European American enlarged its loan-loss provision slightly, to $43.5 million from $41.5 million, chairman Edward Travaglianti noted that the increase was mainly prompted by a larger loan portfolio.
Washington, D.C.-based Riggs National Corp. announced a 62% earnings increase, to $13 million for the quarter, and a more than threefold increase in earnings for the year, to $77 million.
Joe L. Allbritton, chairman and chief executive, said a $55 million reduction in reserves for loan losses, as a result of improved credit quality, contributed most of the profit improvement. +++
PNC Bank Corp.
Pittsburgh Dollar amounts in millions (except per share) Fourth Quarter 4Q95 4Q94 Net income ($176.2) $106.3 Per share (0.52) 0.30 ROA (0.92%) 0.55% ROE (11.92%) 7.42% Net interest margin 3.22% 3.28% Net interest income 563.8 586.0 Noninterest income 23.3 152.0 Noninterest expense 825.8 604.2 Loss provision 1.50 (0.4) Net chargeoffs 55.0 35.0 Year to Date 1995 1994 Net income $408.1 $883.9 Per share 1.19 2.52 ROA 0.54% 1.19% ROE 7.05% 16.09% Net interest margin 3.15% 3.64% Net interest income 2,188.5 2,530.1 Noninterest income 960.4 1,039.0 Noninterest expense 2,469.3 2,237.6 Loss provision 6.0 83.5 Net chargeoffs 133.0 161.0 Balance Sheet 12/31/95 12/31/94 Assets $73,404.0 $77,461.0 Deposits 46,899.0 45,818.0 Loans 48,653.0 44,043.0 Reserve/nonp. loans 351.68% 239.29% Nonperf. loans/loans 0.74% 1.28% Nonperf. assets/assets 0.73% 0.98% Nonperf. assets/loans + OREO 1.10% 1.71% Leverage cap. ratio 6.39% 7.10% Tier 1 cap. ratio 8.00%* 9.36% Tier 1+2 cap. ratio 11.60%* 12.41%