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Banks beat analysts' views
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July 21, 1998: 1:22 p.m. ET
Chase, Citicorp top estimates by 1c a share; Wells Fargo easily beats views
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NEW YORK (CNNfn) - The nation's largest financial institutions on Tuesday reported increases in second-quarter profits that were generally ahead of expectations.
"Today is just a microcosm of what we've been seeing in the past week and a half and that's meeting or beating expectations, coming in with year-over-year earnings growth of around 12 percent," said Sean Ryan, analyst at Bear Stearns.
Net income at Chase Manhattan Corp., the nation's largest bank, rose 16 percent in the second quarter to $1.07 billion, or $1.20 per diluted share, from $925 million, or $1 a share.
Analysts had anticipated profits of $1.19 a share, according to First Call.
The money center bank, which like so many others has tried to push into the investment banking arena, took in $438 million in investment banking fees, due in large part to the favorable interest-rate scenario.
But Chase nearly doubled its provisions for loan losses, from $189 million to $338 million in the latest quarter.
For the first six months of 1998, the bank reported net income of $1.8 billion, or $2 a share, down from $1.85 billion, or $1.99 a share, last year.
Chase stock (CMB) eased 15/16 to 74-1/16 in midday trading Tuesday on the New York Stock Exchange.
Citicorp reported a 7 percent increase in second quarter profits as the credit card giant began to integrate its business segments with Travelers Group Inc.
For the quarter ended June 30, net income rose to nearly $1.1 billion, or $2.30 a share, from $1.02 billion, or $2.10 a share, the company said.
First Call projected profits of $2.29 a share.
Citicorp added that it began during the quarter to explore opportunities presented by the pending merger. In June, the companies began a pilot program to cross-sell Travelers auto insurance to Citibank credit card holders. In corporate banking, Citibank and Salomon Smith Barney began joint efforts to raise capital for clients worldwide.
But not every industry observer is convinced of the benefits of the mega-merger -- which will help Citicorp regain the lead as the nation's leading bank.
"We think there is real reason to be cautious here only because the magnitude of this merger is just far beyond anything we've seen in many, many years," Bear Stearns' Ryan said.
Citicorp Chairman John Reed said the company is continuing "on plan" with the deal.
Despite the solid second quarter, Citicorp stock (CCI) was down 3-3/16 at 177-11/16 in recent Big Board trading.
For the first half of the year, Citicorp said net income rose to $2.16 billion, or $4.53 a share.
Wells Fargo & Co., which also is in the midst of its own mega-merger with Norwest, reported a 48 percent jump in second quarter profits.
Net income rose to $337 million, or $3.87 a share, from $228 million, or $2.47 a share. The results easily beat analysts' consensus views of $3.78 a share.
Loan loss provisions rose 21 percent to $170 million from $140 million in the year-ago period.
"As we go into the merger, Wells Fargo's results should continue to improve," the Bear Stearns analyst said. (166K WAV) or (166K AIFF)
For the first six months, the financial institution reported net income of $652 million, or $7.45 a share.
After rising in early trading on the Big Board, Wells Fargo stock (WFC) was down 2-9/16 at midday to 377-7/16.
Meanwhile, Banc One Corp. of Columbus, Ohio, said second-quarter profits excluding one-time items rose 63 percent to $614.6 million, or 86 cents a share -- two cents above the First Call estimate.
However, as a result of $127.3 million worth of charges to restructure and integrate costs associated with the purchase of First Commerce, net income totaled $487.3 million, or 68 cents a share, in the latest quarter.
A year earlier, net income totaled $48.7 million, or 6 cents, principally due to costs associated with the acquisition of First USA Inc.
For the first half of 1998, Banc One reported net income of $1 billion, or $1.45 a share, compared with $459.6 million, or 65 cents a share.
Early Tuesday afternoon, Banc One stock (ONE) was off 7/8 to 60-1/16.
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