Big California Banks Report Strong Gains : Finance: The state’s fledgling recovery lends a hand. Results are mixed for large money-center banks based in New York.
Four large California financial companies--Wells Fargo, First Interstate, Great Western Financial and H.F. Ahmanson--reported strong first-quarter earnings Tuesday as the state’s fledgling recovery boosted business and firming property values allowed them to reduce their provisions for bad real estate loans.
Wells Fargo said its first-quarter earnings jumped 87% from a year ago, while First Interstate said its net income surged 54%. Earnings at Great Western grew 10%, while H.F. Ahmanson--parent of mortgage giant Home Savings of America--said its net income climbed 68% from a year ago.
Results reported by large money-center banks headquartered in New York were mixed--and all of them suffered from poor results from their trading operations, which were damaged by turmoil in the stock, bond and derivatives markets.
Bankers Trust reported a modest 6% gain in its first-quarter net income, but operating earnings dropped 29% from a year ago. Citicorp and Chemical Bank also said their first-quarter trading profits fell, but stronger performances from their lending operations sent their overall net income higher.
“The big national banks did OK, but they were blown out of the water” by the earnings posted by financial institutions with strong ties to California, said James McDermott, an analyst at investment banker Keefe Bruyette & Woods Inc. in New York.
The recent pickup in California’s economy boosted loan demand at many of the state’s financial institutions in the quarter, analysts said. Real estate values have stabilized in most parts of the state, and the number of borrowers behind on their payments has dropped sharply, allowing most lenders to reduce their provisions for loan losses:
* Wells Fargo’s net income of $202 million, or $3.41 a share, was up 87% from the $108 million, or $1.72 a share, it earned in the first quarter of 1993. The San Francisco-based bank set aside $60 million in provisions for loan losses, compared to $210 million a year earlier.
* First Interstate Bancorp, parent of Los Angeles-based First Interstate, reported first-quarter earnings of $184.1 million, or $2.21 a share. That was 54% higher than the $119.5 million, or $1.38 a share, in operating net income it recorded a year earlier.
* H.F. Ahmanson’s 68% jump in earnings raised its first-quarter net income to $55.4 million, or 36 cents a share. It earned $32.9 million, or 23 cents a share, in the first three months of 1993.
The Irwindale-based parent of Home Savings added $75.5 million for possible loan losses in the first quarter of this year, including $30 million in reserves for losses it may sustain from borrowers whose properties were damaged by the Northridge earthquake. It added $67 million in reserves in the first quarter of last year.
* Earnings gains were less spectacular at Chatsworth-based Great Western Financial, parent of Great Western Bank. The company’s first-quarter earnings climbed 10% to $49.5 million, or 32 cents a share, from the $45.2 million, or 30 cents a share, it posted a year ago. The company set aside $54.8 million in new provisions for loan and real estate losses, down from $88 million a year earlier.
Among the money-center banks, Bankers Trust New York Corp. saw its first-quarter earnings from operations drop 29%, but Citicorp’s net climbed 65% and Chemical Bank’s rose 16%.
“Everybody’s trading income crashed, and that hurt the bottom line,” said George Salem, an analyst at Prudential Securities Corp.
Bankers Trust--one of the biggest players in the market for derivatives, the complex investments designed to hedge against fluctuations in the price of everything from cattle to currency--said its trading revenue plummeted to just $14 million in the first quarter from $346 million in the year-ago period.
It said overall earnings fell to $164 million, or $1.90 a share, from $230 million, or $2.64 a share, in the first three months of last year.
New York-based Citicorp also said it suffered poor trading results but that those setbacks were offset by improvements in lending operations. First-quarter income from operations at the nation’s largest banking company jumped 65% to $609 million, or $1.12 a share, from $370 million, 67 cents a share, a year earlier.
Chemical Banking Corp., the nation’s fourth-largest bank holding company, reported net income of $319 million, or $1.13 a share. That was 16% higher than its operating profit of $276 million, 95 cents a share, in the first quarter of last year.
* HIGH GEAR: Chrysler posted record quarterly results, reflecting the boom in the U.S. auto industry this year. D2
