Wells Fargo & Co.'s hostile bid for First Interstate Bancorp got a shot in the arm Tuesday when Wells reported a 42% jump in fourth-quarter earnings.

The earnings, $306 million, were generally in line with analysts' expections and refuted claims by rival bidder First Bank System and First Interstate that Wells had been overstating its prospects.

"A big part of First Bank's argument has been that Wells isn't capable of doing what they say they're capable of doing," said Bear Stearns & Co. analyst Lawrence R. Vitale. "But there's nothing in this quarter to support that."

The bidding contest is far from closed. Minneapolis-based First Bank System got a boost of its own Tuesday when the Justice Department laid out relatively modest conditions for approving the proposed merger with First Interstate.

Assuming shareholders and regulators approve a First Bank-First Interstate merger, the Justice Department said, the combined bank would have to divest certain Wyoming and Montana branches with $170 million of deposits.

A divestiture plan by Wells Fargo is pending before the Justice Department, which said it would rule on that application shortly.

First Interstate shareholders are expected to vote on First Bank's friendly offer in late February or early March. Wells hopes that investors reject the proposal, and that First Interstate will be forced to the negotiating table.

The markets appear to be siding with Wells. Based on Tuesday's closing prices, Wells Fargo's offer of two-thirds of a share was worth $142.94 per First Interstate share, or $10.8 billion. First Bank's offer of 2.6 shares was worth $123.825 per Interstate share, or $9.4 billion.

The difference between the two bids has hovered close to a billion dollars for about a month. Meanwhile, First Interstate's stock has increasingly moved in sync with Wells Fargo's.

"Interstate continues to climb in lock-step with Wells Fargo, and is inching ever closer to the Wells offer," said Lloyd Greif, president of Greif & Co., which holds First Interstate stock. "If you look at what the market is telling you, it continues to favor the Wells bid," he said.

Wells' earnings were boosted by a $163 million gain from the previously announced sale of the company's joint venture interest in Wells Fargo Nikko Investment Advisors. It also benefited from a reduction in federal deposit insurance expense.

First Interstate, meanwhile, reported earnings of $215.4 million, up 2%. Its results were held down by $27.6 million of merger-related expenses. Net interest income increased 2.4% to $636.9 million, while noninterest income rose 13% to $296.3 million. Return on equity was 22.32%.

Daniel Kaplan and Justin Fox contributed to this story. +++ First Interstate Bank Los Angeles Dollar amounts in millions

(except per share) Fourth Quarter 4Q95 4Q94 Net income $215.4 $211.3 Per share 2.66 2.65 ROA 1.54% 1.54% ROE 22.32% 26.19% Net interest margin 5.50% 5.29% Net interest income 636.9 621.7 Noninterest income 296.3 262.3 Noninterest expense 574.8 538.2 Loss provision NA NA Net chargeoffs 42.8 38.2 Year to Date 1995 1994 Net income $885.1 $733.5 Per share 11.02 8.71 ROA 1.59% 1.38% ROE 24.57% 21.56% Net interest margin 5.43% 5.14% Net interest income 2,558.3 2,347.9 Noninterest income 1,119.6 1,054.3 Noninterest expense 2,213.1 2,197.8 Loss provision NA NA Net chargeoffs 154.7 133.0 Balance Sheet 12/31/95 12/31/94 Assets $58,071.0 $55,813.0 Deposits 50,185.0 48,427.0 Loans 36,673.0 33,222.0 Reserve/nonp. loans 470% 502% Nonperf. loans/loans 0.47% 0.56% Nonperf. assets/assets 0.40% 0.46% Nonperf. assets/loans + OREO 0.63% 0.78% Leverage cap. ratio 6.30%* 5.35% Tier 1 cap. ratio 7.60%* 7.20% Tier 1+2 cap. ratio 10.50%* 10.22%

*Estimate

Wells Fargo & Co.

San Francisco Dollar amounts in millions (except per share) Fourth Quarter 4Q95 4Q94 Net income $306.0 $215.0 Per share 6.29 3.96 ROA 2.47% 1.64% ROE 34.98% 23.96% Net interest margin 6.08% 5.53% Net interest income 667.0 656.0 Noninterest income 434.0 294.0 Noninterest expense 563.0 577.0 Loss provision 00.0 30.0 Net chargeoffs 78.0 58.0 Year to Date 1995 1994 Net income $1,032.0 $841.0 Per share 20.37 14.78 ROA 2.03% 1.62% ROE 29.70% 22.41% Net interest margin 5.80% 5.55% Net interest income 2,655.0 2,610.0 Noninterest income 1,324.0 1,200.0 Noninterest expense 2,201.0 2,156.0 Loss provision 00.0 200.0 Net chargeoffs 288.0 240.0 Balance Sheet 12/31/95 12/31/94 Assets $50,316.0 $53,374.0 Deposits 38,982.0 42,332.0 Loans 35,582.0 36,347.0 Reserve/nonp. loans 325.00% 357.70% Nonperf. loans/loans 1.60% 1.60% Nonperf. assets/assets 1.50% 1.60% Nonperf. assets/loans + OREO 2.10% 2.40% Leverage cap. ratio 7.50% 6.90% Tier 1 cap. ratio 8.80% 9.10% Tier 1+2 cap. ratio 12.50% 13.20% ===

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