BofA Doubles Earnings in 2nd Quarter : Banking: Excluding one-time charges and gains, however, operating profits were unchanged from a year ago.
The parent company of Bank of America said Thursday that its earnings in the second quarter more than doubled to $488 million, but only because its 1992 results were depressed by a huge restructuring charge connected to its merger with Security Pacific National Bank.
San Francisco-based BankAmerica Corp.’s tepid results signaled that the benefits of the huge bank merger, the largest in U.S. history, have yet to fully filter down to the bottom line. Excluding the restructuring charge and a one-time profit stemming from the sale last year of a payroll processing unit, BankAmerica Corp.’s operating profit was virtually the same as in the year-ago quarter.
Analysts said the results also reflect the problems in California’s economy. Still, Bank of America’s results pale in comparison to the substantial profit gains reported earlier this week by California-based Wells Fargo Bank and First Interstate Bank.
Wall Street reacted with disappointment, sending BankAmerica shares down $0.875 to close at $44 in New York Stock Exchange trading Thursday.
BankAmerica Corp., parent of the nation’s second-largest bank, said its second-quarter profit dwarfed the $240 million it earned last year. Last year’s second quarter, however, included a $395-million charge for costs related to the San Francisco bank holding company’s merger with Security Pacific, which was completed in April, 1992.
The merger has created a banking powerhouse with $186 billion in assets and 1,954 branches in 10 states, of which 1,011 are located in California. Among U.S. banks, Bank of America is second in asset size only to Citicorp.
But the combination has exacted an enormous toll. The new bank has closed 563 branches, nearly all of them in California. The bank’s payroll has been trimmed by about 11,000 jobs in the last 15 months, with total head count now standing at 81,000.
Some analysts said Thursday that they expect more jobs will be cut. A bank spokesman said that the merger has been all but completed.
Bank analysts who reviewed the earnings were generally positive, citing the bank’s shrinking bad-loan portfolio and predicting that the fruits of the merger, mainly in the form of lower costs, will become evident in 1994.
“It wasn’t an amazing, blow-your-socks-off quarter, but overall it was pretty good,” said David S. Berry of Keefe Bruyette & Woods in New York. “There has been a lot of concern about the capacity of California banks to sustain or grow revenues given the economy. B of A’s operating revenue was up a smidgen over the previous quarter, and to hold your own in this environment is pretty good.”
“Credit-quality problems are abating and merger savings will start showing up in 1994,” said Paul A. Mackey, a banking analyst with Dean Witter Reynolds of New York. He said B of A continues to work down its problem loans and loan loss provisions.
Bank of America is one of a number of lenders selling problem loans in bulk to Wall Street investment houses at deep discounts. Bank of America, for example, said it completed the sale of $700 million in bad loans to a unit of Morgan Stanley after writing down the loans’ value by $900 million.
“Bundling of loans and selling them gets a headache off management’s back,” said Lawrence W. Cohn of Paine Webber in New York. “Financially, it probably costs shareholders more than it’s worth, but large amounts of problem assets are a distraction to management. That’s why they choose to blow these things out.”
Meanwhile, the woes of Glenfed, the holding company of Glendale-based Glendale Federal Bank, continued. The S&L; reported a fiscal fourth-quarter loss of $29.9 million, up from the $26-million loss reported last year. The loss brought Glenfed’s red ink for the 12 months ended June 30 to $80.8 million, contrasted with a $120.9 million loss over fiscal 1992.
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The losses have left Glenfed in a seriously weakened capital position, and the S&L; holding company has proposed that shareholders approve a recapitalization that will result in serious dilution for current shareholders.
H.F. Ahmanson & Co., the Irwindale-based parent of Home Savings of America, made its $290.9-million net loss official for the second quarter, contrasted with a profit of $67.1 million for the same period last year.
The company said earlier that it expected the loss, largely because of its bulk sale of $1.2 billion in problem loans.
Elsewhere, Bankers Trust New York said second-quarter earnings were $251 million, up 35% from the year-ago quarter. Nationsbank Corp. of Charlotte, N.C., said its second-quarter profit rose by 22% to $306 million.
