Major Banks Post Healthy Profits
Crocker National returned to modest profitability in the first quarter after a disastrous last three months of 1984, the San Francisco-based banking concern announced Tuesday.
Five other major bank holding companies reported healthy first-quarter profits, a trend that analysts attributed to a favorable spread between the banks’ cost of money and interest rates charged on loans. Reporting first-quarter gains between 8.2% and 25% were Citicorp, Security Pacific, Bankers Trust New York, Mellon Bank and Wells Fargo & Co.
Crocker, the nation’s 15th-largest bank holding company, said it made $9 million in the first quarter, compared to losses of $216.1 million in last year’s fourth quarter and $121 million in the first quarter of 1984. Crocker lost $324 million in all of 1984.
“The banks have been doing quite well in the current interest-rate environment,” said Mark Biderman, bank-stock analyst for the Wall Street investment firm Oppenheimer & Co.
Crocker said its earnings turnaround resulted from a “more normal” set-aside for bad loans and increased collections on restructured loans.
The bank reserved $25 million for loan losses in the first quarter, compared to $327 million in the previous quarter and $148 million a year earlier.
“We’ve faced up to the decisions we had to make last year and now we’re seeing some stability, though certainly not a level of earnings that reflect what we ought to be doing,” Crocker spokesman David Sanson said.
The bank said it charged off $26 million in bad loans, primarily in agriculture, real estate and consumer installment lending.
“I’m sure they’re pleased to be back in the black,” said bank-stock analyst Don Crowley of Keefe, Bruyette & Woods, a brokerage firm. “This year, they should show a modest profit and, next year, more meaningful improvement.”
Crocker also set its annual meeting for San Francisco on May 21, when shareholders will vote on a proposal by London-based Midland Bank to acquire 100% of Crocker’s common stock. Midland owns 57% of Crocker’s shares. One shareholder suit seeking to block the acquisition remains unresolved.
Citicorp, the nation’s largest bank holding company, reported first-quarter profits of $277 million, a 24% jump over a year ago.
Los Angeles-based Security Pacific, the nation’s seventh largest, posted gains of $73.5 million in the first quarter, an 8.2% improvement over a year ago despite sizable loan losses in energy and agriculture.
Chairman Richard J. Flamson III told shareholders at the firm’s annual meeting Tuesday that interest income showed strong gains but that overall results “continue to reflect some pressure on certain segments of domestic industries, resulting from uneven levels of economic recovery.”
Wells Fargo, based in San Francisco, said its first-quarter profit rose 12.2% to $44.9 million.
The results include a $50.2-million pretax gain from the sale of a mortgage-banking subsidiary and a $65-million special addition to its loan-loss reserves. Chairman Carl E. Reichardt said the set-aside was made in response to continuing foreign debt uncertainties and did not reflect deterioration in the firm’s loan portfolio.
Wells Fargo’s assets grew modestly, from $26.6 billion to $27.9 billion, in keeping with the company’s strategy of measured growth through acquisition of limited numbers of high-quality assets. Wells Fargo is the nation’s 13th-largest bank holding company.
New York-based Bankers Trust reported a 25% profit gain to $92.5 million for the quarter ended March 31, compared to $74.1 million a year earlier. The bank holding company, the nation’s ninth largest, added $89.6 million to its allowance for loan losses, for a total of $381.6 million.
Mellon Bank of Pittsburgh said its profit rose 25.8% to $41.5 million from $33 million a year ago.
J. David Barnes, president of the nation’s 11th-largest bank holding company, said higher net interest revenue, higher loan levels and growth in fees were partly offset by higher operating expenses and an increased provision for loan losses.
