EARNINGS : BankAmerica Sees Sharply Higher Profit in Quarter

Strong loan growth and a continuing rein on expenses helped BankAmerica Corp. post sharply higher quarterly profit, the nation’s second-largest banking firm said Wednesday.

San Francisco-based BankAmerica reported earnings of $645 million in the second quarter, up 23% from $525 million a year ago.

Also Wednesday, Great Western Financial Corp., parent of America’s second-largest savings and loan, saw quarterly earnings dip 9.7% largely because of the high cost of short-term borrowing used to fund its mortgage loans.

Second-quarter earnings were $50.4 million at Chatsworth-based Great Western, down from $55.9 million for the year-ago period.

At BankAmerica, net interest income was $2.12 billion, up 16% from the $1.83 billion reported for the second quarter of 1994. Loan growth, including the effects of last year’s acquisition of Continental Bank Corp., was largely responsible, BofA said.

Return on average equity in the quarter was 14.3%, up from 13.1% a year earlier. BankAmerica considers that ratio to be one of its most important performance measures.

BankAmerica managed to slightly improve its net interest margin--the “spread” between the average rate it earns on loans and pays out on deposits--to 4.54% in the second quarter, from 4.49% a year earlier.

Lewis W. Coleman, vice chairman and chief financial officer, said in a telephone news conference that many analysts had predicted incorrectly that BankAmerica’s spreads would narrow. “Any time you can grow revenues at a rate faster than expenses, good things begin to happen on the bottom line,” Coleman said.

He said a slight uptick in problem loans--particularly on the consumer side--from this year’s first quarter to the second probably marked the end of a long period of steadily improving credit quality.

“It’s safe to say the California consumer’s health is not improving as rapidly as it had been,” he said.

Analyst Carole S. Berger of Salomon Bros. in New York said credit quality for BankAmerica and other large retail banks had been “unsustainably good” and should have been expected to turn down. Nevertheless, she said BankAmerica’s earnings beat her estimate by a couple of cents per share and that she considers it a good performance.

Great Western Financial, the parent of Great Western Bank, said its interest spread thinned to 2.83% in the second quarter from 3.71% in the corresponding period of 1994. The company said the spread should improve because of the Federal Reserve Board’s recent interest rate cut.

Credit quality continued to improve at Great Western. Non-performing assets dropped to 1.71% of total assets as of June 30, compared to 2.88% a year earlier.

Among other large U.S. banks, Fleet Financial Corp. said it earned a record $172 million, compared to $148 million a year earlier.

Fleet, based in Providence, R.I., said the results were helped by increases in commercial loans, lease financing and mortgage banking operations. Fleet said it increased lending for a fifth consecutive quarter.

Fleet, the nation’s 17th-largest banking company, is merging with Shawmut National Corp., which is among the 30 largest U.S. banks. The merger, expected to be completed by November, would create one of the nation’s 10 largest banking companies.

Boston-based Shawmut reported a profit of $82.6 million, contrasted with a loss of $18.7 million a year ago. Shawmut said its profit was helped by growth in loans and fee income.

Minneapolis-based Norwest Corp. said second-quarter earnings rose to $234 million from $202 million. Loans and leases outstanding increased 7.1% in the quarter from a year ago, said Norwest, which ranks 13th among the nation’s banks.

Republic New York Corp. was an exception to Wednesday’s generally stronger bank earnings reports, as profit fell 86% because of a $120-million charge for firing 850 employees to cut costs, and a drop in interest-earning investments. Republic said net income fell to $11.1 million from $79.1 million a year ago.