Riding an increase in net interest income and a steep decline in provisions for loan losses, Republic New York Corp. on Wednesday reported a 17.8% jump in third-quarter earnings, to $91.4 million.
REPUBLIC NEW YORK New York
Dollar amounts in millions (except per share)THIRD QUARTER 3Q94 3Q93Net income $91.4 $77.6Per share 1.50 1.30ROA 0.78% 0.76%ROE 16.84% 15.26%Net interest margin 2.71% 2.49%Net interest income 218.2 193.0Noninterest income 97.3 108.2Noninterest expense 172.8 157.0Loss provision 3.0 20.0Net chargeoffs (1.7) (4.4)YEAR TO DATE 1994 1993Net income $250.6 $221.3Per share 4.15 3.71ROA 0.74% 0.73%ROE 14.97% 15.01%Net interest margin 2.64% 2.49%Net interest income 628.4 582.8Noninterest income 295.2 284.1Noninterest expense 539.9 460.6Loss provision 16.0 70.0Net chargeoffs 8.8 29.4BALANCE SHEET 9/30/94 9/30/93Assets $41,210 $37,962Deposits 22,226 22,380Loans 9,384 9,031Reserve/nonp. loans 544.28% 247.38%Nonperf. loans/loans 0.63% 1.26%Nonperf. asset/asset 0.21% 0.40%Leverage cap. ratio 6.05%(*) 5.86%Tier 1 cap. ratio 16.45%(*) 15.74%Tier 1+2 cap. ratio 28.00%(*) 27.16%
"What's impressive is how well they've come through this year maintaining earnings power and producing a surprise versus consensus estimates," remarked Judah Kraushaar, a bank analyst with Merrill Lynch & Co.
Mr. Kraushaar noted that Republic had succeeded in maintaining profits for the year to date despite what he called some painful restructuring in the bank's securities portfolio.
Trading income fell more than 25% to $49.3 million, mainly on a decline in revenues from foreign exchange profits and commissions.
Fully diluted earnings per common share increased 15.4%, to $1.50, at Sept. 30, from $1.30 for the same period last year.
Net earnings for the most recent nine months rose 13.3% to $250.6 million, from $221.3 million in the year-earlier period.
A sharp fall in provisions for loan losses to $3 million from $20 million a year ago and a 13% rise in third-quarter net interest income to $218.2 million fueled the improvement.
The two items helped overcome a slump in other operating income and a rise in total operating expenses from acquisitions in London, California, and Canada.
As with other money-center banks, Republic's earnings were helped by income from financial markets outside the United States, where spreads between borrowing rates and lending rates are higher.
The bank noted that a portion of the increase in its net interest income "benefited from a higher volume of investments in wholesale money market assets in Mexico and Brazil."
Republic this week obtained approval from the Mexican government to set up a bank that will focus on deposit gathering and lending to middle-market companies.
It also has another banking application pending in Brazil.
"They still haven't changed their conservative culture but seem to have gotten more aggressive in their growth over the past few years," said Mark Gross, senior vice president with the rating agency IBCA Inc., in New York.