Nine regional banks reported mostly positive earnings results Monday, citing healthy loan growth as the main booster to net interest income despite some margin declines.
"The story in the quarter was loan growth," said Morgan Stanley banking analyst Dennis Shea. He was referring specifically to First Fidelity Bancorp, Lawrenceville, N.J., which saw a 6% jump in loan growth on an annualized basis from the second quarter to the third.
But he could have just as easily been talking about NationsBank Corp., where loans were up 14% annualized in the third quarter. Loan growth was strong "in almost every category," especially in the commercial, residential mortgage, bank card, foreign, and leasing portfolios, the Charlotte, N.C., company said.
However, investing and derivatives setbacks provoked by rising rates did dampen results, particularly at NationsBank. The company shrank its derivatives and investment portfolio in the third quarter, which held earnings flat from the second quarter at $431 million.
Fee revenues also were widely affected by the rate environment, with mortgage banking slowdowns braking growth in noninterest income. TCF Financial Corp., Minneapolis, saw non-interest income slide as gains from mortgage loan sales fell 80%.
Meanwhile, efficiency remained a source of strength, especially at the newly formed Keycorp, where the ratio of operating expenses to revenues dropped 2.2 percentage points to 57.9%. -Jacqueline S. Gold