A cavalcade of strong earnings continued to pour in Wednesday, with banks in almost all regions of the country reporting sharply higher second-quarter profits.
Bank of New York Co. said its earnings rose 45%, reflecting improvements in asset quality and tight cost controls. And rival Republic New York Corp. posted a 13.3% increase in profits.
In Minneapolis, Norwest Corp. reported its profits rose 21% reflecting the purchase of United Banks of Colorado.
Fleet Financial Group Inc. in Providence, R.I., reported that its earnings soared 153%, in line with analysts' expectations.
32% Rise at Boatmen's
Also reporting Wednesday was St. Louis-based Boatmen's Bancshares, which posted a 32% earnings gain, and Fifth Third Bancorp in Cincinnati, which reported an 18% gain. In Albany, N.Y., KeyCorp reported a 36% rise.
But the strong results were not enough to overcome a 12-point decline in the Dow Jones industrials.
Bank of New York shares closed at $39.875, down $1.50; Fleet's stock was unchanged at $29.50; Republic's shares fell 12.5 cents, to $41.625; Norwest's stock lost 62.5 cents, to $38.75; Boatmen's declined 25 cents, to $53.125; Fifth Third fell $1 to $42.50; and KeyCorp dropped 12.5 cents, to $34.375.Earnings at a Glance 2Q '92 Change net income from (millions) 2Q '91Norwest $128 21%Bank of $87New York 45%Fleet $71Financial 153%Republic $64New York 13% Source: Company reports
BANK OF NEW YORK CO.
The bank's results translate into earnings per share of $1.05.
Bank of New York's non-performing assets decreased by $186 million, to $1.102 billion, the fourth consecutive quarterly decline. Its provision for loan losses was $106 million, a $27 million decline from the first quarter.
Loan-loss reserves cover 126.5% of nonperforming loans. Chargeoffs were the lowest they have been since 1990.
The bank continued to shrink its holdings of real estate and highly leveraged transaction loans. nonperforming HLT loans and commercial real estate loans total $273 million, down from $426 million at the end of the first quarter.
Operating expenses of $326 million were down $5 million from the first quarter, cheering analysts.
Revenue growth was moderate. Fee income increased 12% during the quarter, to $272 million. But net interest income of $307 million was unchanged from the first quarter - even though the bank's net interest margin of 3.51% was virtually unchanged from 3.52% in the first quarter.
Still, the decline in credit costs and the stability of operating expenses outweighed the slow revenue growth.BANK OF NEW YORK CO.New YorkDollar amounts in millions (except per share)SECOND QUARTER 2Q92 2Q91Net Income $87.0 $60.0Per share 1.05 0.75ROA 0.85% 0.58%ROE 12.12% 8.68%Net Interest margin 3.51% 3.37%Net interest income 307.9 307.0Noninterest income 272.0 242.0Noninterest expense 326.0 309.0Loss provision 106.0 127.0Net chargeoffs 120.0 148.0YEAR TO DATE 1992 1991Net income $167.0 ($3.0)Per share 2.02 (0.27)ROA 0.85% NMROE 12.12% NMNet interest margin 3.51% 3.50%Net interest income 622.0 659.0Noninterest income 558.0 470.0Noninterest expense 657.0 644.0Loss provision 239.0 470.0Net chargeoffs 276.0 274.0BALANCE SHEET 6/30/92 6/30/91Assets $41,337.0 $41,360.0Deposits 29,582.0 31,832.0Loans 27,493.0 30,436.0Reserve/nonp. loans 126.5% 81.8%Nonperf. loans/loans 2.79% 4.87%Nonperf. asset/asset 2.67% 4.47%Leverage cap. ratio 7.16% 5.82%Tier 1 cap. ratio 7.04% 5.38%Tier 1 + 2 cap. ratio 10.75% 8.51%
REPUBLIC NEW YORK CORP.
The results put earnings per share at $1.06, up from 97 cents in the first quarter and 98 cents a year earlier.
The decline in short-term interest rates helped Republic's profitability. The investment portfolio, at $11 billion, now represents a third of assets, and the bank has been funding some mortgage-backed securities with short-term purchased funds.
Net interest income rose to $178.6 million from $169.5 million in the first quarter, even though average interest-earning assets were virtually unchanged at $28.6 billion.
But trading revenue, an important source of profits for the bank, was down to $25.4 million from $28.9 million in the first quarter and $32.9 million a year earlier.
The bank cited lower activity in the foreign exchange and precious metals markets as reasons for the drop in trading profits.
Earnings also included some one-time gains. There were investment securities gains $6.8 million, up from $400,000 in the first quarter and $1.7 million a year earlier, and $3.2 million in fee income from lease termination payment.
Republic's loan-loss provision of $30 million was up from $20 million in the first quarter. But that didn't concern John Leonard, and analyst at Salomon Brothers Inc. "My sense here is that extra income was available, and they took advantage of it to fix some credits," he said.
More important, Mr. Leonard said, was the decline in total nonperforming assets to $186.6 million from $225.1 million in the first quarter.
The bank's capital raios remained among the highest in the industry, with total capital equal to 28.27% of risk-weighted assets - more than triple the 8% required by regulators. The high ratio reflects the low-risk nature of Republic's assets.REPUBLIC NEW YORK CORP.New YorkDollar amounts in millions (except per share)SECOND QUARTER 2Q92 2Q91Net Income $63.9 $56.4Per share 1.06 0.98ROA 0.70% 0.67%ROE 14.20% 14.47%Net Interest margin 2.63% 2.30%Net interest income 178.6 143.1Noninterest income 67.2 67.7Noninterest expense 130.8 124.6Loss provision 30.0 16.0Net chargeoffs 29.0 17.9YEAR TO DATE 1992 1991Net income $124.3 $111.1Per share 2.08 1.95ROA 0.69% 0.66%ROE 14.10% 14.54%Net interest margin 2.55% 2.22%Net interest income 348.0 279.5Noninterest income 129.4 135.8Noninterest expense 265.4 246.1Loss provision 50.0 32.0Net chargeoffs 276.0 274.0BALANCE SHEET 6/30/92 6/30/91Assets $33,349.9 $29,674.8Deposits 20,359.8 20,530.5Loans 8,146.2 8,517.0Reserve/nonp. loans 170.86% 164.22%Nonperf. loans/loans 1.69% 1.67%Nonperf. asset/asset 0.56% 0.62%Leverage cap. ratio 6.01% 5.58%Tier 1 cap. ratio 16.28% 14.13%Tier 1 + 2 cap. ratio 28.27% 25.05%
The Minneapolis-based banking company scored annualized returns of 1.27T% on average assets and 18.8% on average common equity, compared with a 1.13% ROA and an 18.1 ROE a year ago.
Improving credit quality was the key to stellar results.
The $41.9 million loan-loss provision was less than half that of pro forma results in the prior-year period. Nonperforming assets at June 30 equaled a slim 1.42% of gross loans, compared with 2.29% a year ago. Loss reserves equaled 287.6% of problem loans.
Norwest booked $5.7 million of securities gains, or a modest 3.4% of pretax income. The company said it had reclassified $1 billion worth of securities as held for sale, and said the market value of the holdings exceeded book value by $33 million.
Market values of an additional $11 billion of securities investments not earmarked for sale exceeded book values by $459.1 million.
Norwest also realized $2.6 million of investment securities gains, and there was $74.2 million of unrealized gains left in the portfolio at June 30.
Predicting heightened price competition on credit cards, Norwest wrote down the value of its unamortized credit card purchase premiums by $30 million, to $100 million.
The company's net interest margin dipped by 4 basis points to 5.36%, and the decline was attributed to prepayments on mortgage-backed securities.NORWEST CORP.MinneapolisDollar amounts in millions (except per share)SECOND QUARTER 2Q92 2Q91Net Income $127.0 $105.7Per share 0.86 0.73ROA 1.27% 1.13%ROE 18.80% 18.10%Net Interest margin 5.36% 5.05%Net interest income 490.9 427.6Noninterest income 288.7 244.0Noninterest expense 563.5 454.8Loss provision 41.9 87.9Net chargeoffs 46.7 76.5YEAR TO DATE 1992 1991Net income $250.3 $200.0Per share 1.68 1.42ROA 1.25% 1.07%ROE 18.60% 18.00%Net interest margin 5.38% 4.94%Net interest income 973.3 835.8Noninterest income 558.8 501.7Noninterest expense 1,098.3 889.0Loss provision 88.9 181.3Net chargeoffs 88.9 139.3BALANCE SHEET 6/30/92 6/30/91Assets $40,575.1 $38,938.3Deposits 25,535.8 25,723.9Loans 19,450.5 20,118.5Reserve/nonp. loans 287.60% 177.70%Nonperf. loans/loans 1.05% 1.63%Nonperf. asset/asset 0.71% 1.23%Leverage cap. ratio 6.92% 6.01%Tier 1 cap. ratio 11.04% 8.68%Tier 1 + 2 cap. ratio 14.45% 13.35%
FLEET FINANCIAL GROUP
Credit quality continued to improve. Nonperforming assets fell $86 million, to $1.515 billion, and now represent 5.6% of loans and foreclosed real estate.
It was the first significant decline in bad assets since the New England recession began. J. Terrence Murray, Fleet's chairman and chief executive officer, said in a press release that he expected the decline to continue.
Still, Mr. Murray said that the strength of the Northeast economy remained uncertain and that a cautious approach was necessary.
The company charged off $98 million in loans, compared with $111 million in the first quarter. Its loan-loss provision was $129 million, versus $111 million in the prior quarter. Helping offset the provision was $55 million in securities gains.
Analysts said they were encouraged by the results because all of the company's subsidiary banks showed improvement.
However, they said that it would be at least another year before the $44.6 billion-asset bank could say it's truly over all its problems.FLEET FINANCIAL GROUPProvidence, R.I.Dollar amounts in millions (except per share)SECOND QUARTER 2Q92 2Q91Net Income $71.0 $28.0Per share 0.45 0.23ROA 0.63% 0.35%ROE 11.30% 5.05%Net Interest margin 4.82% 3.97%Net interest income 490.0 291.0Noninterest income 330.5 227.9Noninterest expense 561.7 353.9Loss provision 129.0 115.0Net chargeoffs 98.0 94.0YEAR TO DATE 1992 1991Net income $121.0 $53.0Per share 0.76 0.44ROA 0.54% 0.33%ROE 9.64% 4.73%Net interest margin 4.72% 3.92%Net interest income 961.0 577.0Noninterest income 608.4 422.3Noninterest expense 1,105.1 685.6Loss provision 241.0 210.0Net chargeoffs 209.1 176.3BALANCE SHEET 6/30/92 6/30/91Assets $44,624.0 $32,033.0Deposits 33,488.0 23,590.0Loans 26,616.0 20,320.0Reserve/nonp. loans 106.14% 74.20%Nonperf. loans/loans 3.76% 4.97%Nonperf. asset/asset 3.40% 4.70%Leverage cap. ratio 5.13% 6.84%Tier 1 cap. ratio 10.50% 9.36%Tier 1 + 2 cap. ratio 15.60% 13.33%
Albany, N.Y.-based KeyCorp reported earnings of $59.6 million, up 35.6% from the same quarter in 1991 and 4% from the first quarter.
Analysts praised the results, saying they showed KeyCorp was living up to its performance goals. Return on assets was 1.05%, return on equity was 16.43%, and expenses as a percentage of operating revenues were 61.7%.
Driving the strong earnings were higher yields on earnings assets, which boosted net interest income 3% over the fist quarter, and higher fee income. The growing mortgage servicing business helped push fee income up 4.5%.
KeyCorp also made progress in asset quality. Nonperforming assets fell about $1 million, to $377.7 million. They now equal 2.45% of loans and foreclosed real estate. The company said they will continue to decline.
KeyCorp has $23 billion in assets but will grow to about $30 billion by yearend, when it is expected to have completed the purchase of Puget Sound Bancorp in Washington and 48 BankAmerica branches in that state.
The company cited improving credit quality, a widened net interest margin, and gains in noninterest income as prime contributors to returns that on an annualized basis equaled 1.1% on assets and 14.27% on equity.
Boatmen's net interest margin widened to 4.4% from last year's 4.05%. Problem assets declined by almost 10% a year ago to $307.9 million, or 2.82% of gross loans. Noninterest income rose 23.6%, to $87.4 million.
FIFTH THIRD BANCORP
Profitability rose in the second quarter, with Fifth Third's annualized average return on assets reaching 1.76%, up from 1.69%, and return on average equity equaling 16.8%, up from 17.4% a year earlier.
Fifth Third's problem assets at midyear equaled 1.49% of gross loans, a 33% reduction from a year ago. noninterest income grew 22%, to 50.5 million.