Stars of 2d Quarter: Banc One, Bankers Trust, and State Street

Bankers Trust New York Corp., Banc One Corp., and State Street Boston Corp. were the top-performing banks in their peer groups in the second quarter, according to an American Banker survey.

The rankings repeated first-quarter results at Bankers Trust and Banc One, which posted the strongest returns on average assets in the money-center and superregional categories.

But State Street Boston moved to first from second among large regional banks, displacing MNC Financial Inc., which had achieved the top ranking in the first quarter because of the sale of its credit card business. One of the more troubled institutions in the country, it is now ranked 15th among regionals in return on assets.

Gains Are Limited

Overall, banks showed only slight gains in the second period, as the magnitude of the industry's workout effort set in. (See tables on pages 6 and 8.)

Returns on assets and returns on equity were either flat or lower, despite continued savings from cost cutting and benefits from lower interest rates.

The survey also showed that growth in nonperforming assets is near its peak for most institutions.

"The rate of deterioration slowed quite a bit," said Richard J. Mueller, an analyst at Duff & Phelps.

Still, there were few notable changes in the rankings from the first quarter.

In the money-center category, Bankers Trust moved up a notch to No. 2 in return on assets, nudging Republic New York Corp. into the No. 3 slot. Merger partners Chemical Banking and Manufacturers Hanover also switched places, with Chemical moving up from seventh place to fourth, and Hanover moving down.

Minneapolis-based Norwest Corp. joined the ranks of top superregionals, moving from No. 3 in return on equity to No. 1.

Lloyd P. Johnson, Norwest's chief executive, attributed the rise in rank to the bank's diversification of earnings and said its results "would've been higher if we hadn't issued more equity."

Citicorp, which said last week that its outlook was rosier, showed continued deterioration in its ratios during the second quarter and remained the lower-ranked money-center bank. Its nonperforming asset ratio rose 25.8%.

California banks also showed sharp declines in performance during the second quarter. Wells Fargo & Co. reported huge increases in problem loans, and problems worsened at Security Pacific Corp. and First Interstate Bancorp.

Wells' return on assets fell from 1.09% to 0.60%, dropping it from fourth to 15th place. Its return on equity fell from 19.34% in the first quarter to 10.34% in the second quarter, dropping its ranking from No. 1 to No 15. Its nonperforming asset ratio rose from 2.86% to 3.68%, dropping it from 11th place to 18th.

Status Quo Seen for Near Term

Analysis don't see much room for improvement in Well's immediate future. The Office of the Comptroller of the Currency has just begun its yearly examination, and analysts expect further big provisions and increases in nonperforming assets in the fourth quarter as a result.

Citicorp's ROA fell to 0.1% from 0.13%, its ROE fell from 1.62% to 0.59%, and its nonperforming asset ratio rose from 6.49% to 8.17%. Analysts, while hopeful in their outlook, remained cautious.

One of the few surprises of the second quarter was in New England, where nonperforming assets at Shawmut National Corp. actually fell, prompting speculation that the worst of the economic decline in the region might be over. Bank of Boston Corp., also reported surprisingly good results.

'No Quick Fix'

Still,loan growth remains anemic amid signs that recovery from the national recession will be slower than expected.

"There is no quick fix for what ails the banking system. It will be a slow turn," said James J. McDermott Jr., president of Keefe, Bruyette & Woods Inc.

Mr. McDermott said blanks still have a burdensome amount of problem loans to restructure before they can return to their former high profitability levels, and that takes time.

He pointed out that some, like Security Pacific and Bank-America Corp., and Chemical Banking Corp. and Manufacturers Hanover Corp. have been trying to speed up the rebound through mergers, which allow for huge cost savings and loan writedowns. "It's the quickest way to buy an institution a ticket out of the recession," Mr. McDermott said.

However, experts say those combinations will take at least two years to show improvement. [Tabular Data Omitted]

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