Barnett Gains 85%, Society 53%

The earnings season for big banks opened strongly on Monday as five companies reported solid second-quarter results. Wide interest rate spreads and continuing progress with credit problems fueled most of the profits.

"This interest rate environment is bank heaven," said Thomas Hanley, an analyst at First Boston Corp.

Despite the good news and a rise in the overall stock market, however, stock prices of most of the reporting banks declined on Monday.

J.P. Morgan & Co., after opening up $1.25 a share on better than expected results, closed unchanged at $1.625. Morgan's profit jumped 67% over the year-earlier quarter, to $385 million. Chase Manhattan Corp., whose earnings jumped 13% over the previous year's quarter, to $152 million, ended the day down $1.25, to $27.875.

Barnett bests Estimate

First Chicago Corp. posted a 19% increase in earnings, to $68.2 million, but securities gains played a big role in the improvement. Its shares fell 67.5 cents, to $35.875.

Florida's Barnett Banks Inc. beat Wall Street analysts' consensus estimate of earnings, reporting profits of $54.1 million, up 85% from the year-ago quarter. Its stock fell $1, to $37.

Society Corp. in Cleveland also showed strong gains of $87.7 million, driven in part by some branch sales related to its acquisition of Ameritrust Corp. Its shares fell $1, to $58.75.

"Margins seen to be broadly strong, and nonperformers are stable or down," said Judah Kraushaar, an analyst at Merrill Lynch & Co. "But the tension this quarter in the investment world is how much of the good news is already out on the tables."


The New York company's second-quarter profits were 28.7% better than in the first quarter of this year.

Earnings were paced by $434 million of interest revenue -- ahead of a healthy $414 million in the first quarter -- and $287 million of trading revenue. Morgan said that it registered large gains in trading interest rate contracts and foreign exchange.

The nation's fifth-largest bank company earned a disappointing $165 million from its trading activities in the first quarter.

Corporate finance revenues grew 13%, to $110 million, during the second quarter, while investment management fees rose 8%, to $95 million.

"The texture of the earnings is quite good," said Arthur Soter, an analyst at Morgan Stanley & Co., noting the breadth of contributions from Morgan's "basic businesses."

Securities Gains

The company was also helped by nonoperating gains. Morgan booked investment securities profits of $152 million -- up from $4 million in the year-earlier quarter. About $124 million of the gain came from cashing in securities received as part of Latin American debt restructurings.

Morgan's portfolio of unrealized securities gains, meanwhile, grew from $644 million at Dec. 31 to $797 million at June 30, according to Raphael Soifer, an analyst at Brown Brothers Harriman & Co.

The company also used $60 million of federal income tax credits in the second quarter, lowering its tax bill to $123 million and its effective tax rate to 24%. Without tax benefits, the tax rate in the first six months would have been 35%.J.P. Morgan & Co.New YorkDollar amounts in millions (except per share)Second Quarter 2Q92 2Q91Net Income $385.0 $231.0Per share 5.95 1.17ROA 1.34% 0.89%ROE 25.80% 18.04%Net yield 1.87% 1.75%Net interest income 474.0 397.0Noninterest income 844.0 557.0Noninterest expense 745.0 585.0Loss provision 25.0 10.0Net chargeoffs 88.0 349.0Year to Date 1992 1991Net income $684.0 $504.0Per share 3.44 2.56ROA 1.20% 0.96%ROE 23.39% 20.23%Net yield 1.85% 1.66%Net interest income 930.0 759.0Noninterest income 1,466.0 1,255.0Noninterest expense 1,267.0 1,208.0Los provision 35.0 20.0Net chargeoffs 131.0 381.0Balance Sheet 6/30/92 6/30/91Assets $107,528 $96,858Deposits 36,288.0 38,752.0Loans 30,085.0 28,817.0Reserve/nonp. loans. 220.5% 236.4%Nonperf. loans/loans. 2.0% 2.2%Nonperf. asset/asset. 0.59% 0.67%Leverage cap ratio. 6.6% 6.0%Tier 1 cap. ratio 7.1% 6.7%Tier 1+2 cap. ratio. 10.8% 10.5%


The nation's sixth-largest bank company reported net income of $152 million, up 8% from its $141 million profit in the first quarter and 15% from $132 million in the year-earlier quarter.

A strong net interest margin of 4.03% was a major contributor to the stronger than expected earnings. Chase's margin was 3.93% in the first quarter.

The domestic real estate portfolio fell to $7.8 billion from $8.6 billion at yearend, although Chase added $91 million of loans to its portfolio of foreclosed real estate during the quarter. The company ended the period with $1.0 billion of foreclosed properties.

In line with other recent quarters, Chase added a provision of almost $300 million to its loan loss reserves and charged off $297 million.

Total nonperforming loans of $4.467 billion, representing 4.49% of gross assets, were $129 million higher than at the end of the first quarter.Chase Manhattan Corp.New YorkDollar amounts in millions (except shares)Second Quarter 2Q92 2Q91Net income $152 $132Per share 0.83 0.80ROA 0.61% 0.53%ROE 10.90% 10.90%Net interest margin 4.03% 3.81%Net interest income 878 834Noninterest income 607 554Noninterest expense 959 938Loss provision 295 265Net chargeoffs 297 682Year to Date 1992 1991Net income $293 $248Per share 1.64 1.53ROA 0.61% 0.59%ROE 10.80% 10.50%Net interest margin 3.98% 3.82%Net interest income 1,739 1,674Noninterest income 1,194 1,057Noninterest expense 1,918 1,874Los provision 595 505Net chargeoffs 1,591 952Balance Sheet 6/30/92 6/30/91Assets $97,428 $98,505Deposits 67,297 70,595Loans 64,705 71,286Reserve/nonp. loans. 44.0% 51.0%Nonperf. loans/loans 6.90% 6.53%Nonperf. asset/asset 5.63% 5.64%Leverage cap. ratio 6.2% 5.0%Tier 1 cap. ratio 6.2% 4.9%Tier 1+2 cap ratio 10.7% 9.2%


Fresh realty lending troubles surfaced during the second quarter.

Though anemic, the company's 0.51% annualized return on assets was up from 0.45% during the first quarter and 0.44% during the prior-year period. The annualized return on common equity was 9.1%, compared with 8.3% last quarter and 8% a year ago.

Figuring strongly in the results was $41.8 million of gains from the sale of equity securities, an amount equaling 41% of pretax income. The company posted $11 million of equity securities gains a year earlier.

First Chicago suffered a 35% increase in troubled realty loans during the second quarter, finishing the period with $1.27 billion of nonperforming assets that equaled 5.1% of gross loans. Despite the realty defaults, the nonperforming asset ratio was down from 5.3% at March 31 and 6.0% a year ago.

Chairman and chief executive Richard Thomas warned that "the depression in the commercial real estate sector continues unabated," and said First Chicago still is considering ways of shedding "nonperforming and nonstrategic assets, particularly those involving real estate."

Credit card fees of $116.6 million were up 18.4% from the year-earlier period, and trust fees of $48.5 million rose 12.8%. However, service charges and commissions fell 13.2%, to $87.6 million.First Chicago Corp.ChicagoDollar amounts in million (except per share)Second Quarter 2Q92 2Q91Net income $68.2 $57.3Per share 0.79 0.73ROA 0.51% 0.44%ROE 9.10% 8.00%Net interest margin 2.64% 2.50%Net interest income 300.9 275.0Noninterest income 336.6 275.0Noninterest expense 420.4 394.8Loss provision 105.0 90.0Net chargeoffs 115.0 145.0Year to Date 1992 1991Net income $128.9 $106.8Per share 1.50% 1.36%ROA 0.48% 0.40%ROE 7.70% 7.60%Net interest margin 2.62% 2.54%Net interest income 597.1 566.0Noninterest income 668.0 576.0Noninterest expense 851.2 776.8Loss provision 200.0 185.0Net chargeoffs 226.0 241.0Balance Sheet 6/30/92 6/30/91Assets $47,391.0 $48,097.0Deposits 29,623.0 0,716.0Loans 23,600.0 24,678.0Reserve/nonp. loans 08.0% 99.0%Nonperf. loans/loans 3.30% 3.70%Nonperf. asset/asset 2.69% 3.25%Leverage cap. ratio 6.60% 5.70%Tier 1 cap. ratio 6.40% 5.50%Tier 1+2 cap. ratio 10.70% 9.30%


Barnett's net interest margin rose to 5.08%, up 4 to basis points from the first quarter and 37 basis points from the year-earlier quarter, Charles W. Newman, Barnett's chief financial officer, said he expects the margin to hold that level for the rest of the year.

Barnett's provision for loan losses fell 44% from a year ago, to $48.1 million. It was down 31% from the first quarter's $70.1 million.

|Good Sign' for Real Estate

Barnett was able to sell $29 million in foreclosed real estate during the second quarter, which Mr. Newman interpreted as "a good sign" of strengthening in Florida's real estate market.

Barnett also benefited from a pickup in noninterest income, which reached $129.6 million, 18% higher than the year-ago quarter. Mr. Newman cited improved results from Barnett's mortgage origination, trust, brokerage, and student loan servicing subsidiaries.

Separately, Barnett's pending merger partner, First Florida Banks Inc., reported net income of $9.1 million, compared with a loss of $5.5 million in the year-ago quarter.Barnett Banks Inc.Jacksonville. Fla.Dollar amounts in millions (except per share)Second Quarter 2Q92 2Q91Net income $54.1 $29.2Per share 0.67 0.42ROA 0.66% 0.36%ROE 10.21% 6.94%Net interest margin 5.08% 4.71%Net interest income 375.9 342.5Noninterest income 129.6 110.1Noninterest expense 366.5 310.4Loss provision 48.1 85.6Net chargeoffs 47.8 84.2Year to Date 1992 1991Net income $97.7 $47.5Per share 1.22 0.70ROA 0.60% 0.30%ROE 9.54% 5.79%Net interest margin 5.06% 4.63%Net interest income 744.6 672.3Noninterest income 253.7 233.5Noninterest expense 714.6 611.7Loss provision 118.2 201.6Net chargeoffs 108.9 162.2Balance Sheet 6/30/92 6/30/92Assets $32,380.0 $32,024.0Deposits 28,476.0 28,336.0Loans 23,655.0 23,862.0Reserve/nonp. loans 81% 76%Nonperf. loan/loans 2.39% 2.47%Nonperf. asset/asset 3.77% 3.77%Leverage cap. ratio 6.05% 4.63%Tier 1 cap. ratio NA NATier 1+2 cap. ratio NA NA


Cleveland-based Society Corp. posted $87.7 million of second-quarter income, up 53% from prior-year results that were restated to reflect the acquisition of Ameritrust Corp.

Annualized, the showing equaled a 1.51% return on assets and a 21.02% return on common equity, compared with respective returns of 0.90% and 13.7% a year earlier. Kelly Holland in New York, Kenneth Cline in Atlanta, and Steve Klinkerman in Chicago contributed to this article.

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