St. Paul Bancorp, under pressure from investors to improve profits or sell, said Thursday it would have some unexpected first-quarter expenses, and would continue to be hurt this year by a rash of mortgage prepayments.
The $6 billion-asset thrift company based here also reported that fourth-quarter earnings fell 8% to $13 million.
Although St. Paul's fourth-quarter earnings per share of 36 cents matched consensus expectations, at least one analyst, Stephen Covington of Stifel, Nicolaus & Co., St. Louis, cut his 1999 profit estimate for the company by a dime to $1.50.
St. Paul's lagging performance has prompted analysts to lower their expectations over the past three months. Further downward revisions are expected.
The company's full-year earnings plunged 49% to $29 million. But excluding expenses related to acquisitions and a cost restructuring plan, St. Paul's 1998 earnings dropped just 3%.
The lackluster results come at a critical juncture for St. Paul. New York money manager Harry V. Keefe has sponsored a shareholder resolution to ask the company's management to sell. So far, executives at St. Paul have rejected the idea.
Chief executive officer Joseph Scully said in a prerecorded telephone message for investors that he was "confident" last year's expense cuts and computer systems upgrades "would serve to improve our performance."
Mr. Keefe, who holds 3% of St. Paul's stock through two hedge funds, began putting pressure on St. Paul last July. St. Paul launched a cost- cutting program in August, but said it was not done in response to Mr. Keefe. "We looked at our business and the competitive environment and we recognized a number of changes would be necessary to remain competitive," Mr. Scully said. St. Paul, which used to hold quarterly earnings teleconferences, stopped the practice in the third quarter, saying the calls had been dominated by Mr. Keefe and his associates.
On Thursday, the company also announced a stock repurchase program of up to two million shares in six months. The thrift's shares closed the day's trading at $23, up 50 cents.
Mr. Covington said he heard nothing from St. Paul indicating to him that its goal of a better performance would be achieved. The company said it aims to earn 15% on equity within the next two years. Analyst Fred Cummings of McDonald Investments, Cleveland, said he believes it will be a challenge. What's more, "It's asking a lot for the shareholders to be that patient."
Mr. Cummings said St. Paul could be bought for $30 to $35 per share. The analyst said logical buyers would include Old Kent Financial Corp. of Grand Rapids, Mich., and Charter One Financial Inc. of Cleveland. A number of other companies may also be interested, he said. +++
St. Paul Bancorp Chicago Dollar amounts in millions (except per share) Fourth Quarter 4Q98 4Q97 Net income $13.2 $14.4 Per share 0.32 0.35 Year to Date 1998 1997 Net income $28.7 $56.1 Per share 0.69 1.36 Balance Sheet 12/31/98 12/31/97 Assets $6,034.1 $5,225.8 Deposits 3,895.0 3,871.4 Loans 4,563.4 3,684.6 ===