Four of the biggest Western banks, including Wells Fargo & Co., reported higher earnings for the second quarter on Tuesday, while two big California thrifts posted declines from the previous year.
At Wells, earnings increased 13% from the same period last year to $232 million, primarily because it didn't make any new provisions to its loan loss reserve. In last year's second quarter, Wells made a $60 million provision.
Among other institutions, San Francisco-based Union Bank, reported a quadrupling of net income over last year to $52 million. Salt Lake City- based First Security Corp., reported a 2.9% increase in net income to $36.23 million, while its primary Utah rival, Zions Bancorp, did even better, notching a 25% increase in net income over last year to $20.5 million.
Irwindale, Calif.-based H.F. Ahmanson & Co., the country's biggest thrift with $53 billion in assets, reported earnings of $62.2 million, 15% below the same period last year. Oakland, Calif.-based Golden West Financial Corp., with $34 billion in assets, reported net income of $104 million, 18% below last year.
The commercial banks reported they were aided by growth in loans, and in some cases, expense reductions. Problem assets were up, but still relatively low, bank officials and analysts added.
"The company continues to build a foundation for future revenue growth and improvements in efficiency," said Wells Fargo chairman Paul Hazen.
Net interest income for Wells was nearly flat from a year ago, at $659 million, while noninterest income rose only 3%, to $310 million. But total loans rose $1.2 billion from the end of the first quarter, to $33.9 billion, excluding $3.9 billion of mortgage loans that were held for sale at the end of June, and $1.3 billion in this category at the end of March.
Bear Stearns & Co. Inc. analyst Lawrence R. Vitale said this was a remarkable achievement. He said he believed Wells' loans might decline. Mr. Vitale added that most of the growth came from commercial and industrial loans as well as credit card loans.
Additionally, Mr. Vitale and other analysts said they were pleased Wells put the breaks on an outflow of core deposits. Core deposits stayed flat in the quarter at $37 billion. At yearend, they were $40 billion.
But, on the negative side, nonperforming and restructured loans increased 11% from the end of the first quarter to $644 million, more than offsetting a $50 million reduction in foreclosed assets, Mr. Vitale said.
Mr. Vitale also said he was puzzled that net charge-offs increased to .84% of average loans, from .73% in the second quarter last year.
"I don't understand why they can't bring that down," he said.
Kanetaka Yoshida, president and chief executive of $18 billion-asset Union Bank, attributed his institution's gain to "continued strong loan growth, healthy net interest margins, and better asset quality."
The bank is 72%-owned by Bank of Tokyo, which plans to merge next year with Mitsubishi Bank.
The reported earnings per share of 71 cents for $12.4 billion-asset First Security were in line with analysts' estimates. But $5.7 billion- asset Zions' did much better than expected, with per share earnings of $1.39 beating the consensus estimate by 13 cents. +++ Wells Fargo & Co. San Francisco Dollar amounts in millions (except per share) Second Quarter 2Q95 2Q94 Net income $232.0 $206.0 Per share 4.51 3.57 ROA 1.81% 1.59% ROE 26.71% 21.67% Net interest margin 5.66% 5.56% Net interest income 659.0 656.0 Noninterest income 310.0 299.0 Noninterest expense 560.0 526.0 Loss provision 0.0 60.0 Net chargeoffs 70.0 61.0 Year to Date 1995 1994 Net income $465.0 $408.0 Per share 4.46 3.49 ROA 1.80% 1.59% ROE 26.80% 21.38% Net interest margin 5.62% 5.56% Net interest income 1,324.0 1,298.0 Noninterest income 552.0 599.0 Noninterest expense 1,097.0 1,049.0 Loss provision 0.0 120.0 Net chargeoffs 135.0 122.0 Balance Sheet 6/30/95 6/30//94 Assets $50,931.0 $52,287.0 Deposits 38,784.0 41,205.0 Loans 33,896.0 34,172.0 Reserve/nonp. loans 302.3% 295.7% Nonperf. loans/loans 1.9% 2.1% Nonperf. assets/assets 1.7% 2.1% Nonperf. assets/loans + OREO 2.6% 3.1% Leverage cap. ratio 6.7% 7.2% Tier 1 cap. ratio 8.6% 10.1% Tier 1+2 cap. ratio 12.5% 14.6% ===