3 Financial Companies’ Profits Rise
Bank of America Corp., Citigroup Inc. and J.P. Morgan & Co. on Monday reported sharply higher quarterly earnings as the major financial institutions rebounded since last year’s market rout, meeting or beating analysts’ expectations.
Meanwhile, Bank of New York Co. provided some disappointment as it was able to beat expectations only after booking a one-time gain on the sale of some of its businesses.
The strong U.S. economy fed growth in mortgage loans, credit card purchases and fees from mergers and acquisitions at the companies.
Bank of America said its net income more than doubled as revenue grew and it was able to cut costs since the merger last October of NationsBank Corp. and BankAmerica Corp.
Profit more than tripled at Citigroup, the nation’s largest financial services company, which was created last year with the merger of Citicorp and Travelers Group.
J.P. Morgan said its profit rose almost threefold, helped by investment banking fees.
Unprecedented turmoil in emerging markets last year battered profits at most U.S. multinational banks and brokerages, so third-quarter 1999 results look particularly strong by comparison.
“The big banks have come through,” said Daniel Bandi, a money manager at National City Investment Management, which oversees $23 billion. “Last year you had so much dislocation in the securities markets. They were taking losses left and right.”
* Bank of America’s third-quarter operating profit rose to $2.15 billion, or $1.23 a share, from a profit before charges of $893 million, or 50 cents, a year ago. The year-earlier earnings excluded a $725-million pretax merger charge. The bank had been expected to earn $1.21 a share, according to the average figure from a survey of analysts by First Call Corp. For the latest quarter, non-interest income rose to $3.7 billion from $2.4 billion on gains in credit card, trading, investment banking, mortgage banking and service-charge income; net interest income rose 2% to $4.6 billion from $4.5 billion.
* Citigroup posted a third-quarter profit in line with expectations as the financial services giant saw improvements in diversity of revenue streams and cut costs.
Profit from operations rose to $2.45 billion, or 70 cents a share, from $729 million, or 20 cents, a year ago. Revenue rose by a third to $14.6 billion.
However, net income at the New York-based company--which consists of Citibank, securities firm Salomon Smith Barney Inc. and insurer Travelers Property Casualty Corp.--was little changed from the second quarter. Salomon alone reported core income of $432 million, contrasted with a loss last year stemming from Russia’s economic downturn.
* J.P. Morgan said its third-quarter net income climbed to $442 million, or $2.22 a share, from $156 million, or 75 cents. The results beat the First Call average forecast of $2.15 a share. Analysts had revised their estimates lower. Non-interest revenue jumped 56% and net interest revenue grew 17%. Trading revenue jumped sixfold to $424 million, and investment banking revenue was up 28%.
J.P. Morgan also said it would buy back up to $3 billion of its shares.
In New York Stock Exchange trading, Bank of America rose $1.38 to close at $49.56, Citigroup rose $1.56 to close at $43.69 and J.P. Morgan gained $7.31 to close at $113.
* Bank of New York Co. posted third-quarter earnings that were bailed out by a one-time gain from the sale of its commercial finance businesses, allowing it to inflate net income to $773 million, or $1.02 per share, which beat estimates of 42 cents. However, the company said the sale of its BNY Financial Corp. unit and a few other business lines helped boost income by about 75 cents per share on a pretax basis. Profit before a net gain fell to $235 million, or 31 cents a share, from $301 million, or 39 cents, a year earlier. The bank, which provided only a net income figure, declined to confirm its earnings excluding gains or charges.
Net interest income rose to $417 million from $415 million. The company’s stock closed at $34.31, up 44 cents, on the NYSE.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
* American Home Products Corp. reported a $2.87-billion net loss for the third quarter, hurt by a previously announced $3.29-billion after-tax charge for the company’s proposed national settlement of diet-drug litigation. The No. 5 U.S. drug maker said the net loss amounted to $2.20 per share and also included after-tax charges of $220 million for the previously announced restructuring of the company’s poorly performing Cyanamid crop-protection business and buybacks of herbicide inventories.
Excluding the diet-drug and Cyanamid charges, the company said, it earned $633.5 million, or 48 cents. That compares with operating earnings of 46 cents a share for the 1998 third quarter and narrowly exceeds the consensus forecast of 47 cents among analysts. Sales rose 3% to $3.32 billion from $3.22 billion a year ago.
* Dana Corp., maker of light-truck axles, reported a 26% rise in operating profit to $172 million, or $1.03 a share, for the third quarter, in line with estimates; sales rose 5.5% to $3.13 billion. The company said it will close 14 plants and 29 distribution centers to cut costs. Dana said auto makers’ North American production may be slowing, which could affect its fourth-quarter results.
* Eastman Kodak Co.’s third-quarter profit from operations grew 17% to $466 million, or $1.45 a share, as sales rose 6% to $3.58 billion and the company continued its cost-cutting efforts.
* Mirage Resorts Inc. said its third-quarter profit from operations fell 3% to $29.2 million, or 14 cents a share, excluding $2.22 million in expenses involved in opening new casino resorts, as revenue climbed 82% to $606.5 million. Analysts had expected 18 cents a share. Mirage said it generated less cash flow than expected and that profit also was hurt by a renovation of its Treasure Island casino resort in Las Vegas that prevented its renting about 8% of the property’s rooms.
* Warner-Lambert Co.’s profit jumped 38% in the third quarter to $417 million, or 47 cents a share, as strong sales of its cholesterol drug Lipitor and epilepsy drug Neurontin made up for a decline in sales of the diabetes pill Rezulin. Sales overall rose 20% to $3.24 billion.
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Bloomberg News and Reuters were used in compiling this report.
