Not known for being forthcoming with financial data, banks are doing an about-face and are issuing segment reports.

CHICAGO -- For years, Signet Banking Corp. stuck to disclosing little beyond consolidated results, leaving analysts to their own devices to determine how well various lines of business were doing.

But chief financial officer Wallace B. Millner 3d changed all that -- and touched off a mild rally in Signet stock.

Constantly beset with questions about Signet's lucrative and fast-growing credit card unit, and noticing the high trading multiples accorded to independent credit card companies, Mr. Millner took the lead in issuing a supplemental report on Signet's card unit. The additional disclosures were published on March 28, as part of the 1993 annual report.

On the day of publication, Signet's common stock rose 1.9%, greater appreciation on Wall Street.

Kudos from Investors

Mellon Bank Corp., Pittsburgh, and National City Corp., Cleveland, are among the banking companies that long have provided segment information. Both banks report favorable investor response as a result.

But the day is rapidly approaching when all banking companies will be required to provide performance details on major lines of business. Aside from momentum building within the industry, analysts, accountants and federal regulators are pushing for new levels of disclosure, making it likely that industry-wide segment disclosure standards soon will be required.

"Within two years, we will all be reporting segment results," predicted Robert S. McCoy Jr., chief financial officer of Wachovia Corp.

Developing Rules

In a first-of-its-kind joint project, the standards boards of the U.S. and Canadian accounting professions are collaborating on the development of rules governing so-called "disaggregated" disclosure.

The groups expect to publish a preliminary draft by this year's fourth quarter, which probably will recommend banks release segment reports reflecting the kind of data institutions use internally.

The International Accounting Standards Committee, whose members are drawn from 65 nations, said it hopes to publish a proposed new set of standards for segment reporting by September.

It is receiving open encouragement from the International Organization of Securities Commissions, whose members operate securities exchages in various countries.

Meanwhile, the Association for Investment Management and Research, which represents financial analysts, is conducting a spirited lobbying campaign for segment reporting. Disagregated financial reports are "vital, essential, fundamental, indispensable and integral to the investment analysis process," said the analysts' association in a recent white paper.

To be sure, prospective segment disclosure requirements will not be confined to financial institutions. But given the growing complexity and large number of financcial intermediaries, segment reporting's effects could be felt especially strongly in the financial services industries.

In banking, for example, myriad operating cost allocation schemes and assumptions about capital go into the creation of segment reports, injecting shades of gray. And cost estimation techniques vary by institution -- as do segment definitions.

"Because you have to work with so many assumptions, the comparability of segment reports from bank to bank would certainly be questionable," said Thomas A. Richlovsky, treasurer of National City Corp.

Indeed, Wachovia's Mr. McCoy cited a lack of disclosure standards as a major reason why his institution has dragged its heels on segment reports.

"If we are going into the business of segment reporting, we ought to have some guidelines pretty well thought out, so comparisons between institutions are valid," said Mr. McCoy.

Even with some standardization, segment reporting still would be problematic because of the continual changes going on inside institutions.

What with product evolution, acquisitions, and divestitures, lines of business can vary dramatically in size and composition from year to year, frustrationg efforts to track trends.

For example, Mellon Bank Corp. soon will acquire Dreyfus Corp., which has $80 billion in mutual fund assets under management. The unit's results will be reported under two Mellon segments, consumer investment and institutional investment, whose size and revenue composition will change markedly.

"Restructure, and you won't have comparable numbers from year to year," said Mr. Millner of Signet. "At some point, it becomes totally unrealistic for investors to expect companies to retain the same form."

Competitive Worries

A further concern about segment reporting, voiced in some quarters, is that proprietary information will wind up in the hands of competitors.

This issue has inhibited Firstar Corp. chairman and chief executive Roger Fitzsimonds. He said he believes investors do not fully appreciate the feebased operations at his Milwaukee-based bank, but thus far has resisted segment disclosures on competitive grounds.

Mr. Richlovsky is calm on this point, saying National City has found ways to supply segment data "meeting the needs of investors and analysts, but not detailed and revealing enough that a competitor could get somethings."

Of course, there's a universe of banking subsidiaries whose results are less than stellar. Segment disclosures could heighten internal political tensions -- and bring weaknesses into uncomfortably sharp focus.

More Information to Analysts

Ultimately, segment reporting will enable analysts to probe more deeply inside companies, doubtlessly engendering a lot more second-guessing from Wall Stree. At some level, that spells a loss of discretion for managers.

No sooner did Segnet report its credit card results, for example, than Sanford C. Bernstein & Co. called for the divestiture of its commercial banking franchise.

"Segment reporting will require us to explain a lot more to the market, and it's not going to be easy," said Mr. McCoy of Wachovia.

"Investors will be able to see the levels of capital and asset commitments to lines of business. If your decisions are out of sync with investors' preferences, be they only momentary, it could be negative."

Management-Based Approach

Mitchell A. Danaher, an industry fellow at the Financial Accounting Standards Board, said members of the U.S. and Canadian accounting standards boards are learning towards a management-based approach to segmentation.

In this approach, segment reporting requirements would be based on "the organization of internal data regularly reveiewed by the chief executive; the breakdowns he or she normally requires," said Mr. Danaher.

While this approach should minimize reporting expenses and essentially permit a custom reporting format for each institution, it will not assure the comparability sought by practitioners such as Wachovia's Mr. McCoy.

Mr. Danaher said segment reporting uniformity, though an ideal, "is difficult, if not impossible, to put into practice," owing to the increasaed costs of assembling information and the diversity of institutions out there.

Thus, segment reporting could prove a mixed blessing for analysts, who will gain a wealth of additional information, but who often won't be able to use traditional peer ranking techniques to assess it.

Still, as attested by Mr. Millner's experience at Signet, segment reporting could spark wider investor appreciation of banking companies, especially the outfits with good news to tell.

"We have been after the banking industry for several years to give us a better feel for where institutions are making money," said Anthony Davis, a banking analyst with Dean Witter Reynolds Inc.

The introduction of comprehensive segment reports "will mark the time when age-old complaints about banks selling at a discount to the market can rationally be addressed."

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