B of A Posts 19% Profit Gain; Great Western Hurt by Rates
Joining other West Coast banks whose strong loan growth reflects the reviving California economy, BankAmerica Corp. on Wednesday reported a first-quarter profit of $611 million, or $1.46 a share, up 19% from $513 million, or $1.27 a share, for the same period a year ago.
Also on Wednesday, Great Western Financial Corp. reported lower first-quarter earnings because of rising market interest rates over the last year, but it saw a sharp rise in new real estate loan volume as wholesale lending operations the company has been developing began to gather momentum.
Loans at San Francisco-based BankAmerica, the nation’s second-largest banking company behind Citicorp, rose to $144.2 billion in the first quarter from $123.5 billion a year earlier, while the set-aside for credit losses was cut to $100 million from $125 million.
Net interest income was up $252 million from the amount reported for the first quarter of 1994, reflecting increases in loans, including the effects of mergers and acquisitions, and an improvement in the net interest margin.
BankAmerica’s first-quarter net interest margin--the difference between the rate it pays on deposits and what it charges on loans--was 4.55%, up from 4.45% in 1994.
Some of the profit improvement was attributable to BankAmerica’s acquisition of Chicago-based Continental Bank last year.
Analyst Christopher Kotowski of Oppenheimer called BankAmerica’s quarter outstanding. Although loan growth is strong at BankAmerica, Kotowski said he is less worried about deterioration in loan quality there than at banks in the Southeast and Midwest, where the economy perked up earlier and loans have been increasing at double-digit rates.
Chatsworth-based Great Western, America’s second-largest savings and loan behind Home Savings of America, reported first-quarter net income of $43.5 million, or 28 cents a share, down from $49.5 million, or 32 cents a share, a year earlier.
The company’s net interest margin shrank to 2.90% in the quarter ended March 31 from 3.21% in the fourth quarter of 1994 and 3.66% in the first quarter of 1994, as rates paid on deposits crept up faster than those charged on mortgages.
However, the shrinkage began to reverse itself in March. James F. Montgomery, chairman and chief executive, said that as rates level off in the general economy, Great Western’s profit margins “can be expected to improve swiftly and significantly.”
Great Western added $2.5 billion in new real estate loans in the first quarter, up dramatically from $1.7 billion in the same period of 1994.
Elsewhere around the country, several large regional banks announced stronger first-quarter earnings Wednesday, including Minneapolis-based Norwest Corp., up nearly 14%; Fleet Financial Group of Providence, R.I., 17% higher, and Republic New York Corp., up nearly 10%.
