Wachovia, Barnett Report Gain in Quarterly Income
ATLANTA -- Two major southeastern banks reported improved earnings Thursday, suggesting that credit-quality woes in the region may be easing.
"We've gone from talking about a barrage of problems to an isolated problem here and there," said Susan R. Leadem, banking analyst with Robinson-Humphrey Co. in Atlanta.
Net income at Wachovia Corp., Winston-Salem, rose 7% from the level in the preceding year, to $80.6 million. Barnett Banks Inc., Jacksonville, reported earnings of $37 million, more than twice the $16 million earned in the third quarter of 1990.
A Strained Comparison
While the percentage gain was greater at Barnett, it reflects unusually low earnings in the previous year's quarter, when real estate-related credit losses forced the bank, Florida's largest, to take a $100 million loan-loss provision.
In addition, a dispute with the Securities and Exchange Commission over tax credits recently forced Barnett to restate its third-quarter 1990 earnings to $16 million, from the $25.8 million originally reported.
Even so, Barnett's earnings of 51 cents a share came in ahead of the analysts' consensus, which was 43 cents a share, or $29.8 million. As a result, Barnett's stock rallied strongly Thursday.
Strong Margins Noted
The company attributed its strong performance to a stronger net interest margin, growth in noninterest income and a loan-loss provision that declined 7% from the preceding quarter, to $80 million.
Robinson-Humphrey, which had come out with the most bearish Barnett estimate, 24 cents a share, or $16.6 million, had been expecting Barnett to report a higher loan-loss provision. "We were obviously wrong on this one," Ms. Leadem said, adding that the Atlanta-based brokerage firm is reconsidering its "sell" recommendation on Barnett.
It appears Barnett was not badly damaged by the recent Chapter 11 bankruptcy of Koger Properties Inc., a Jacksonville real estate developer. Barnett's nonperforming loans fell to $558 million in the third quarter, from $593 million the preceding quarter.
The bank said the reduction "occurred despite the addition of $36 million in loans involving one relationship," which is believed to be Koger.
Barnett's reserves currently cover 81% of its nonperforming loans. Atlanta-based SunTrust Banks Inc., which reported a 6% increase in earnings Tuesday, to $93.6 million, covers 84.3% of its nonperformers and Wachovia 118%.
Ms. Leadem said earnings at both Barnett and Wachovia are being driven in part by a drop in the cost of funds, as declining interest rates allow banks to drop the rates they pay depositors.