Wall Street is bracing for a potentially large fourth-quarter restructuring charge at Banc One Corp., which has been struggling to reposition its balance sheet and cut overhead expenses.
The $87 billion-asset banking company got caught by sharply rising rates this year as a derivatives-driven liability sensitivity caused funding costs to rise at a faster rate than asset yields.
A third-quarter net-interest margin of 5.27% was down 84 basis points from a year ago.
According to filings with the Securities and Exchange Commission, Banc One at Sept. 30 had a net unrealized loss of $939 million in its derivatives portfolio, along with a $208 million unrealized net loss on securities classified as available for sale.
The banking company cautions that unrealized gains on certain balance-sheet instruments partially offset these deficits.
Some analysts speculate that a definitive overhaul of Bane One's balance sheet will require a charge of at least $100 million, but several said they would welcome the accompanying removal of uncertainty.
"The current maturity mismatches at Bane One make it impossible to evaluate the company's core profitability, and the uncertainty is inordinately depressing the stock," said Robert Albertson, a banking analyst with Goldman, Sachs & Co.
George Meiling, Bane One's treasurer, reiterated Thursday the bank's determination to reduce its exposure to rising rates, but cautioned: "There are many different ways to reduce liability sensitivity. Some involve charges and some don't."
In a presentation in Boston last week, Mr. Meiling volunteered that if a "material event" were to occur, Bane One "would have a legal obligation to disclose it and discuss it fully."
Bane One sold $2 billion of U.S. Treasury and agency securities in the third quarter, incurring a net loss of $32 million on the transactions.
In a filing with the SEC, the Columbus, Ohio-based banking company said it would shed additional securities investments in the fourth quarter.