Banks' loan problems grow in latest batch of results
Chicago, Jan 18, 2001 (FWN Financial via COMTEX) -- The latest earnings reports
from U.S. banks Thursday reinforced concerns over credit quality in the
industry, as First Union Corp. warned on its profit outlook for 2001 and
regional banks reported a constant stream of higher loan losses.
Banking stocks fell across the board, tugging the Standard & Poor's banking
index down 1.5% and extending the negative momentum began Wednesday after Bank
One Corp. reported a $1 billion increase in its provisions to cover loan losses
in the fourth quarter.
"More and more commercial banks are focusing on credit quality," said Jefferies
& Co. analyst Charlotte Chamberlain. "Reality is just hitting people over the
head with a two-by-four."
Larry Cohn, a banking analyst with Ryan Beck & Co., called the earnings period
"pretty dull because so many banks pre-announced shortfalls," but he cut his
2001 earnings estimate for First Union by 10 cents to $2.60 a share after the
bank lowered its guidance for the current year.
The Charlotte, N.C.-based bank reported fourth-quarter operating earnings of
$681 million, or 69 cents per share, down 20% from $842 million, or 86 cents per
share, in the year-earlier period. The results were in line with revised
estimates, despite a $533 million increase in non-performing assets.
The bank's sale of 58 branches, credit card assets and some securities added to
revenue. Net interest income declined $214 million from 1999 to $1.8 billion.
"They are still operating at a low level of efficiency," Cohn said. "They are
going to have to cut expenses a whole lot more than we had understood."
U.S. Bancorp, soon to be acquired by Firstar Corp., said fourth-quarter earnings
rose 11% as corporate and consumer banking businesses' profits soared after a
year in which results were tempered by heavy investment spending. Payment
services income was essentially flat.
Minneapolis-based U.S. Bancorp earned $429.9 million, or 57 cents a share, in
the fourth quarter, compared with $386.4 million, or 52 cents per share, in the
previous year. The results, U.S. Bancorp's last as an independent company,
matched First Call's average analyst estimate.
Net income rose 13% to $418.6 million, including one-time merger-related charges
of $11.3 million in the most recent period and $17.4 million in the year-ago
quarter.
In Pennsylvania, PNC Financial Services Group Inc., a commercial bank shifting
its focus to money management and investor services, posted a 12% increase in
fourth-quarter earnings, powered by money management and consumer banking, cost
cutting and a securities processing firm takeover.
Pittsburgh-based PNC said fourth-quarter net income, including income from
divested businesses, rose to $334 million, or $1.13 a share, from $304 million,
or $1.01 a share, in the year-ago period. The most recent results beat First
Call's average analyst estimate by a penny.
CREDIT COSTS RISE AT PROVIDIAN, REGIONS FINANCIAL
Providian Financial Corp., one of the nation's largest credit-card lenders, said
Thursday that fourth-quarter net earnings and revenues rose by 34% including a
$36.7 million one-time charge related to lawsuit settlements.
San Francisco-based Providian reported pre-charge earnings of $236.0 million, or
80 cents per share, for the fourth quarter, compared with the previous year's
$159.4 million, or 55 cents per share. Including the charge, earnings came in at
$214.0 million, or 73 cents per share, meeting estimates.
Providian said it expects that the net credit loss rate will peak in the first
half of 2001 before stabilizing and improving over the balance of the year. In
preparation for this, the company added $130 million to the loan loss reserve
during the fourth quarter, bringing the total to $1.45 billion.
Jefferies analyst Chamberlain said, during a conference call, that analysts were
focused on the company's expectation that charge-offs will be 100 basis points
higher this year.
Regions Financial, of Birmingham, Ala., also met Wall Street estimates,
reporting a net income of $128.4 million or 58 cents per share, a penny per
share decrease from $129.1 million, or 59 cents, in 1999.
The earnings represented an 11% increase in loans but a 18% decrease in
securities. The Southeastern bank has agreed to acquire investment firm Morgan
Keegan Inc. during the first quarter. It also announced a quarterly dividend
increase to 28 cents per share.
Net interest income rose 5% from 1999, or $18.0 million, to $360.5 million in
the fourth quarter. Provisions for loan losses increased 46%, or $17.5 million,
to $38.3 million. |
