BankAmerica's stock surged 4% after its chairman predicted 25% net income growth this year and said operations will continue to expand without further mergers.
A rebound in trading and investment banking fees, a decline in noninterest expenses arising from mergers, and solid credit quality will send profits higher, the company said.
BankAmerica's presentation was in sharp contrast to that of First Union Corp., its hometown rival in Charlotte, N.C. First Union told the investment community earlier this week that its earnings growth would slip.
"Bank of America today is an unexploited franchise. The company will continue to gather strength and momentum," chairman Hugh McColl said.
"We have the greatest opportunity in banking without any further mergers."
"I want to emphasize we will not take a meat cleaver to our international operation," Mr. McColl added. "We will continue to support our corporate customers as they do business around the world. But we're in the business of serving clients and making money and where we can't do both, we will make some changes."
According to BankAmerica's presentation at a Salomon Smith Barney conference, solid loan growth - somewhat offset by shrinking margins on loans - is likely to boost net interest income by 2% to 3%.
The company said it expects noninterest income to grow by 7% to 9%, assuming that trading and investment banking rebounds from the second half of 1998. The noninterest income will not be better than in the first half of 1998.
Noninterest expense is expected to decline by 8% on cost savings from the NationsBank Corp. and Barnett Banks Inc. mergers. Provisions for expenses are likely to continue at 60 to 65 basis points.
BankAmerica "is very well positioned," said Stephen Biggar, a banking analyst at Standard & Poor's equity group. "They've taken several steps to put 1998's earnings shortfall and management shake-up behind them."
"Fee-based income should be the primary earnings driver, aided by the rebound in investment banking fees and strong service charge income," Mr. Biggar said. "The company also continues to have untapped potential in several areas, including credit cards and asset management."
BankAmerica shares closed at $64.875, up $2.75 for the day.
Shares of First Union Corp. continued to slip. The stock closed at $51.75, off 43.75 cents. The stock lost $4.9375 Wednesday after it issued its profit warning.
First Union said operating income will fall short of earlier goals because of accounting changes, spending increases, and economic uncertainty.
A lack of fuller detail sparked questions about First Union's ability to balance expenses while increasing earnings. Analysts also raised questions about First Union's ability to integrate its acquisition of CoreStates Financial Corp.
For the day the Standard & Poor's bank index added 2.44%, the Dow Jones industrial average 0.88%, the Nasdaq bank index 1.54%, and the S&P 500 1.79%.
Gainers included Citigroup, up $1.678, to $55.50; Chase Manhattan Corp., up 50 cents, to 73.625; and J.P. Morgan & Co., up $4.6875, to $104.75.
Thrifts were also up. Astoria Financial gained 56.25 cents, to $44.5625; Charter One Financial $1.4375, to $27; and Washington Mutual $1.875 to $41.50.