Shawmut Shows a Big Loss, But Nonperformers Slacken
The beleaguered Shawmut National Corp. posted another big loss on Wednesday, but a decline in nonperforming assets hinted that New England bank problems may be easing.
"It may be too early to use the word recovery, but the large banks of New England are stabilizing," said James Moynihan, an analyst for Advest Inc. in Boston. "It's an encouraging sign."
Hartford, Conn.-based Shawmut reported a second-quarter loss of $58.7 million, compared with a $30.2 million profit a year earlier.
Also in the Northeast, Fleet/Norstar Financial Group Inc. posted a modest profit of $28 million, bolstered by a one-time gain. Its earnings were down 48% from a year ago.
Meanwhile, Continental Bank Corp. reported $31 million in earnings, following a year-earlier loss, and First Interstate Bancorp announced an $80.3 million loss, as previously projected.
After several quarters of uninterrupted increases, Shawmut's total nonperforming assets fell 6.3%.
"They've stopped the worst of the hemmorhaging," said Michael Plodwick, an analyst for C.J. Lawrence, Morgan Grenfell in New York. "I think they can return to profitability by year-end, but the degree of profitability is still in question."
Fleet/Norstar, based in Providence, R.I., showed an overall uptick in nonperforming assets but pointed to declines at both its New Hampshire and Rhode Island units.
Similarly, BayBanks Inc. noted a $5 million decline in non-performing assets when it unveiled a $1.1 million profit for the second period earlier this week.
"It is too early to say for sure, but the results of the second quarter suggest that some stability is developing in local markets," said William M. Crozier Jr., chairman of Boston-based BayBanks.
Shawmut took a $101.6 million provision for bad loans in the second quarter, down from $234 million in the first quarter. Chargeoffs totaled $101.6 million, down from $140.2 million. Shawmut officials predict chargeoffs will continue to decline in the second half.
Still, few analysts believe Shawmut is entirely out of the woods.
"It's encouraging," said Nancy Bush, an analyst for Brown Brothers Harriman in New York, about nonperforming assets and chargeoffs. "But I'd like to see a decline across two quarters before I believe their completely on track."
The loss for the latest quarter amounted to 81 cents a share, versus a profit of 40 cents a year earlier.
And losses continue to erode Shawmut's capital. At June 30, equity stood at $1.03 billion, or 4.77% of assets, down from 5.20% on March 31. Shawmut is actively searching for an equity infusion from private investors, but has come up empty handed so far.
In a report to analysts, Shawmut officials confirmed that they are mulling a bid for Citytrust, an insolvent Bridgeport, Conn., bank recently put on the block by the Federal Deposit Insurance Corp. Analysts also said Shawmut "hinted" at a deal that would infuse it with needed equity, but the company declined to elaborate.
Fleet/Norstar's profits of $28 million amounted to 23 cents a share, in line with analysts' expectations. In the year-earlier period, the banking company had earnings of $54.1 million, or 47 cents a share.
Fleet's quarter was largely salvaged by a one-time gain of $24 million on the sale of portfolio securities.
"Without that gain, they would not have been strong earners," said Ms. Bush of Brown Brothers Harriman. "It was not a great quarter," she said, referring to Fleet's slim core profits and its rise in non-performing assets.
Fleet's Rhode Island unit posted a $15 million decline in nonperforming assets over the three-month period to end at $633 million. Nonperforming assets at its New Hampshire unit dipped $2 million to $113 million. But Fleet's Long Island subsidiary showed a 21% increase in nonperforming assets to $170 million.
The Long Island troubles contributed to an overall 4% rise in nonperforming assets to $1.5 billion, up $57 million.
Chicago-based Continental Bank Corp. posted earnings of $31 million, or 41 cents a share and restated the year-earlier period to show a $46 million loss. The first quarter was also restated to show a $31 million gain.
Provisions for loan losses totaled $63, up from $43 million in the first quarter of 1991.
Nonperforming assets were virtually flat, at $770 million, compared with $768 million in the first quarter of 1991.
Total revenues increased to $256 million, from $198 million in the second quarter of 1990.
The restatement of earnings reflect a change in the method Continental accounts for its domestic equity investments.
First Interstate's loss of $80.3 million was attributed to problems in Nevada and Oregon and on the sagging real estate market in California.
Nonperforming assets dipped slightly to $1.78 billion from $1.79 billion at the end of the first quarter.
The nonperformers totaled 3.53% of assets at June 30, compared with 3.55% as of March 31.
To take care of the problems, the Los Angeles company set aside $295 million in a provision for loan losses.
Of the big four California banks, First Interstate was the first to express concern about California real estate and has been setting aside reserves for several quarters.
C&S/SOVRAN and BARNETT
Two large Southeastern banking companies continued to struggle with loan losses in the second quarter.
Barnett Banks Inc. reported net income of $29.2 million, down 50% from $58.5 million in the second quarter last year. C&S/Sovran Corp. earned $61.6 million, 19% less than in the year-ago period.
C&S/Sovran, with headquarters in Atlanta, said nonperforming assets increased 14% over the first-quarter level, to $1.3 billion.
C&S/Sovran also announced that its board, which met Tuesday, had authorized continuing discussions with Charlotte-based NCNB Corp. about a possible merger.
The board, in addition, reaffirmed C&S/Sovran's quarterly dividend of 39 cents a share. But analysts noted that second-quarter earnings of 45 cents a share included 6 cents in securities gains. "On a core operating basis, they're paying out everything they earn. You can't continue to do that for very long," said Ms. Bush of Brown Brothers Harriman.
The poor showing at Jacksonville-based Barnett can be attributed to a surge in the loan-loss provision to $85.6 million.
On a positive note, Barnett's nonperforming assets actually fell 5% from the first-quarter level, to $942.8 million, or 3.77% of total loans.
"It's going in the right direction," said J. Frederick Meinke, a banking analyst with Raymond James & Associates Inc. in St. Petersburg. "My guess is, they're stuck in this [nonperforming assets range] for another couple of quarters."
Table : SHAWMUT NATIONAL CORP. Hartford and Boston Dollar amounts in millions (except per share)Second Quarter 2Q '91 2Q '90Net income ($58.7) $30.2Per share (0.81) 0.40
Net interest income (tax equiv.) 182.3 194.2Spread 3.71% 3.57%ROA NA NAROE NA NANoninterest income 98.7 92.2Noninterest expense 237.8 226.8Loss provision 101.6 25.9Net chargeoffs 101.6 NAFirst Half 1991 1990Net income ($175.4) $70.8Per share (2.40) 0.95
Net interest income (tax equiv.) 359.0 392.2Spread 3.66% 3.56%ROA NA NAROE NA NANoninterest income 273.2 238.7Noninterest expense 471.5 453.3Balance Sheet 6/30/91 6/30/90Assets $22,610 $25,055Deposits 14,167 15,279Loans 14,261 16,817Shareholder equity 1,033 1,425Loss reserve 1,035.1 NAReserve/loans ratio 7.16% 7.02%Nonperf. loans 1,259.5 1,422.6Nonperf. loans/loans 8.71% NATier 1 capital ratio 5.36% 5.68%
Table : FLEET/NORSTAR Providence, R.I. Dollar amounts in millions (except per share)Second Quarter 2Q '91 2Q '90Net income $27.9 $54.1Per share 0.23 0.47
Net interest income (tax. equiv.) 292.7 111.1Spread 3.96% 3.73%ROA 0.35% 0.61%ROE 5.05% 10.15%Noninterest income 226.7 309.7Noninterest expense 353.9 314.9Loss provision 115.0 NANet chargeoffs 93.8 66.3First Half 1991 1990Net income $53.4 ($45.9)Per share 0.44 (0.46)
Net interest income (tax. equiv) 580.0 642.1Spread 3.90% 3.95%ROA 0.33% (0.26%)ROE 4.73% (4.73%)Noninterest income 419.8 444.0Noninterest expense 685.6 632.3Balance Sheet 6/30/91 6/30/90Assets $32,033.2 $34,120.2Deposits 23,818.8 22,829.3Loans 20,686,2 21,060.8Shareholder equity 2,184.9 2,186.0Loss reserve 749.0 728.0Reserve/loans ratio 3.68% 2.95%Nonperf. loans 1,008.9 NANonperf. loans/loans 4.88% NATier 1 capital ratio NA NA
Table : First Interstate Bancorp Los Angeles Dollar amounts in millions (except per share)Second Quarter 2Q '91 2Q '90Net income $(80.3) $95.1Per share (1.43) 1.42
Net interest income (tax equiv.) 534.2 N/ASpread 5.07)% 5.03%ROA (0.65%) 0.70%ROE (14.3%) 16.0%Noninterest income 326.6 269.1Noninterest expense 652.7 626.9Loss provision 295.0 117.7Net chargeoffs 173.6 226.4First Half 1991 1990Net income $(20.6) $192.2Per share 0.63 3.60
Net interest income (tax equiv.) 1,095.0Spread 5.19 4.89%ROA (0.08%) 0.80%ROE (3.18%) 19.9%Noninterest income 636.7 512.9Noninterest expense 1,312.4 1,242.0Balance Sheet 6/30/91 6/30/90Assets $50,303.9 $55,082.0Deposits 42,125.7 44,664.9Loans 30,492.9 35,587.1Shareholder equity 2,743.0 2,705.0Loss reserve 1,140.0 1,186.0Reserve/loans ratio 3.74% 3.34%Nonperf. loans 989.0 1,010.0Nonperf. loans/loans 3.24% 2.84%Tier capital ratio NA NA
Table : C&S/Sovran Corp. Atlanta Dollar amounts in millions (except per share)Second Quarter 2Q '91 2Q'90Net income $61.6 $76.0Per share 0.45 0.47
Net interest income (tax. equiv.) 478.9 479.2Spread 4.42% 4.38%ROA 0.52% 0.64%ROE 8.37% 10.34%Noninterest income 206.9 178.3Noninterest expense 418.9 410.3Loss provision 169.5 123.6Net chargeoffs 157.9 63.3First Half 1991 1990Net income $88.8 $180.6Per share 0.65 1.36
Net interest income (tax. equiv.) 959.4 947.7Spread NA NAROA 0.39% 0.77%ROE 6.07% 12.40%Noninterest income 395.0 361.9Noninterest expense 854.7 818.8Balance Sheet 6/30/91 6/30/90Assets $49,075 $50,327Deposits 38,750 36,586Loans 32,414 33,118Shareholder equity 2,982 3,118Loss reserve 714.0 509.9Reserve/loans ratio 2.20% 1.54%Nonperf. assets 1,259.4 500.0%Nonperf. assets/loans 3.84% 1.50%Primary capital ratio 6.05% 5.93%