Earnings for 1994 were up 8.8% at the nation's largest bank holding companies, according to an American Banker survey.
A look at the top 100 banks in assets revealed that full-year net income for the group increased to $33.4 trillion, up from $30.7 trillion in 1993.
The year was a mixed bag, analysts said. Some banks, like Minneapolis- based Norwest Corp. and Bank of Boston Corp., capitalized on cost cutting, wide net interest margins, and healthy loan growth.
At the same time, bad plays on interest rates hurt others. Two victims, Columbus, Ohio-based Banc One Corp. and Pittsburgh-based PNC Bank Corp., "lost a third of their earnings power because of interest rate problems," said Duff & Phelps analyst Claire Percarpio.
Some banks in the Northeast and Middle Atlantic states saw weak earnings because of sluggish loan and revenue growth. These included Philadelphia- based CoreStates Financial Corp. and PNC.
"CoreStates and PNC are very good examples of not booking as many loans as they had budgeted because they did not want to lower their credit standards," Ms. Percarpio said.
Overall, analysts said earnings were strong this year for the biggest 100 banks. Banks have not seen healthier asset portfolios in a long time, and they're profitability keeps getting better, analysts said.
"We've certainly seen a narrowing in the gap of profitability between the very large banks and the midsize or smaller banks," Ms. Percarpio said.
The more profitable community banks can achieve ROAs as high as 2% or better, she said. ROA for the largest banks averaged 1.56% in 1994, according to the survey.
Analysts said earnings levels won't rise much in 1995. "Overall, earnings growth will be somewhere between 8% and 10% for the entire industry," said Dennis Laplante, an analyst at Fox-Pitt Kelton.
He said earnings will be hurt next year by a decline in net interest margins as the cost of funding deposits increases.
Earnings will get jolted slightly as banks begin to raise their loan- loss provisions. Banks have already lowered provisions close to minimum levels to get earnings boosts, but loan demand is on the rise nationally.
Analysts expect banks to garner much of their profits through cost cutting this year. The $29.3 billion-asset CoreStates, for example, is expected to make a dramatic restructuring announcement at the end of March.
Providence, R.I.-based Fleet Financial Group said it will lay off 3,000 people over the next 18 months as a result of its agreement to acquire Shawmut National Corp.
Lawrenceville, N.J.-based First Fidelity Bancorp. has said it will reduce its job force this year by 1,000, or 7.7%.
And J.P. Morgan & Co. is expected to take a first-quarter charge related to job eliminations, but the bank hasn't said how many people will get the ax.
PNC will also close up to one-third of its 612 branches over the next three years. The bank said it does not know how many employees it will lay off.