Banks Report Strong Profits

J.P. Morgan & Co., the nation’s fourth-largest bank, said Tuesday that its second-quarter net operating income rose a better-than-expected 6%, bolstered by strong trading and corporate finance revenue. Two regional banks big on the merger scene also reported strong operating profits.

Norwest Corp., which is acquiring Wells Fargo & Co. in a $30-billion deal, said its earnings rose 15% on brisk business in most of its banking operations.

First Union Corp. posted a 23% jump in operating profit, before a $634-million charge for merger-related expenses, including the acquisition of Money Store and CoreStates Financial Corp.

J.P. Morgan had operating income (excluding a one-time gain) of $402 million, or $1.96 a diluted share in the quarter, up from $374 million, or $1.85, a year ago. The earnings beat analysts’ average forecast of $1.90 a share.

The bank’s revenue rose 20% to $2.15 billion. Net interest revenue fell 41% to $290 million, while non-interest revenue rose 44% to $1.86 billion, driven by an 84% surge in trading revenue to $877 million. Investment banking revenue rose 23% to $362 million.

Morgan, hurt by Asia’s economic crisis late last year, said it reduced its exposure to Southeast Asian entities by 26% from the first quarter, to $3.4 billion.

Minneapolis-based Norwest, the nation’s 11th-largest bank, said its earnings met estimates of $382 million, or 49 cents a share, up from $331.4 million, or 43 cents, a year ago, on a thriving mortgage banking business. Non-interest income rose 26% to $950 million as mortgage banking fees surged 62% to $287 million. Net interest income rose 8% to $1.08 billion.

First Union, the sixth-largest U.S. bank, earned $883 million, or 92 cents a diluted share, up from $719 million, or 74 cents, a year ago, benefiting from its expanded corporate finance and money management business. The results beat analysts’ estimate of 90 cents.

Charlotte, N.C.-based First Union’s net interest income fell 8% to $1.88 billion, but non-interest income rose 49% to $1.53 billion.

At a Glance

Other earnings, excluding one-time gains and charges unless noted:

HEALTH-CARE PRODUCTS:

* Johnson & Johnson’s second-quarter profit rose 11% to $1.01 billion, or 74 cents a diluted share, from a year ago, matching analyst estimates. Sales rose 1.5% to $5.78 billion. J&J;, whose product line ranges from prescription drugs to consumer goods such as Band-Aids and Neutrogena beauty supplies, said domestic sales rose 4.2% while international sales fell 1.3%. Analysts said strong U.S. prescription drug sales saved the day for J&J;, whose consumer products and medical devices segments saw sales decline in the face of competitive pressure.

BROKERAGES:

* Donaldson, Lufkin & Jenrette Inc., the securities unit of insurer Equitable Cos., said second-quarter net income rose 42% to $142.3 million, or $1.05 a diluted share, beating the average forecast of $1.02 a share. The gain was led by investment banking as buoyant markets spurred mergers and underwriting. Return on equity at the eighth-largest U.S. securities firm based on capital was 26.1%, compared with 24.7% a year ago.

* Merrill Lynch & Co. said second-quarter earnings rose 13% to a record $545 million, or $1.33 a diluted share, from a year ago, falling a penny short of analyst forecasts, as fees from selling new stocks and bonds and advising on mergers jumped 39% to $869 million. The nation’s largest brokerage and No. 1 underwriter said revenue after interest expense rose 19% to $4.71 billion. Return on shareholder equity fell to 24% from 28.5% a year ago.

FINANCIAL SERVICES:

* Associates First Capital Corp. said its second-quarter earnings rose 20% to $292.9 million, or 84 cents a diluted share, from a year ago, meeting analyst estimates. The finance company, which was spun off by Ford Motor Co. earlier this year, said revenue rose 16% to $2.43 billion as the loans it had outstanding increased 19% to $64.3 billion.

* Fannie Mae, the nation’s biggest mortgage finance company, said its second-quarter profit rose 13% to $848 million, or 80 cents a diluted share, from a year ago, as it earned more from its portfolio of mortgage-backed securities and reduced its credit expenses. The results beat analyst estimates by a penny.

* MBNA Corp., the second-largest U.S. credit card company, said second-quarter earnings rose 24% to $172 million, or 32 cents a diluted share, from a year ago, meeting analyst forecasts. MBNA also said it plans to split its stock 3-for-2 on Oct 1. The company, whose average client earns about $60,000 a year, added 5 million new customers with 4.2 million new accounts.

PAPER AND WOOD PRODUCTS:

* Boise Cascade Corp. said its second-quarter per-share loss narrowed, beating estimates, as it benefited from higher paper prices and revenue from its office products distribution and wood distribution businesses. Profit from operations was $1.2 million, or a loss of 4 cents a share after the payment of preferred dividends, compared with a loss of $16.2 million, or 53 cents, a year ago. Analysts expected a loss of 16 cents a share. Revenue rose 15% to $1.54 billion.

* Champion International Corp. posted a second-quarter operating profit of $25 million, or 26 cents a diluted share, up from a loss of $11 million, or 12 cents, a year ago, exceeding analyst expectations of 21 cents a share. Revenue rose 4.7% to $1.47 billion. Champion benefited from increased pulp and paper prices while its building products business was hurt by lower prices for lumber and logs.

* International Paper Co.’s second-quarter operating profit rose 53% to $90 million, or 29 cents a diluted share, from a year ago, exceeding analyst forecasts of 26 cents. Revenue fell 6.5% to $4.71 billion. The company also said it has earmarked an additional $500 million of its assets for sale as it continues trimming costs.

* Weyerhaeuser Co. said its second-quarter profit fell 23% to $69 million, or 34 cents a diluted share, from a year ago, on lower prices for building products such as lumber amid slack Asian demand. The results exceeded recently lowered analyst estimates of 22 cents a share. Revenue fell 8% to $2.68 billion.

OTHER INDUSTRIES:

* Eaton Corp., a maker of auto parts and semiconductor-manufacturing equipment, said second-quarter profit fell 9.5% to $114 million, or $1.57 a diluted share, from a year ago, because of a slump in sales in its semiconductor business and strikes at customers General Motors Corp. and Paccar Inc. Revenue fell 10%, to $1.71 billion from $1.91 billion. Analysts had expected $1.59 a share.

* Enron Corp.’s second-quarter earnings jumped 39% to $145 million, or 42 cents a diluted share, from a year ago, exceeding estimates of 39 cents, as it profited from soaring power prices during a June heat wave. The natural gas and electricity company said revenue more than doubled to $6.52 billion from $3.25 billion.