Consumer Business Lifts Profits at Banks
Bank of America Corp. and smaller banks posted higher fourth-quarter profits Wednesday, helped by growth in consumer businesses.
Low interest rates encouraged people to take out and refinance mortgages and borrow on credit cards, even as the economy remained weak. Charlotte, N.C.-based Bank of America, the country’s No. 3 banking company and California’s largest retail bank, also benefited from a $488-million tax settlement.
Bank of America earnings rose 27% from the year-ago quarter, while at Cincinnati-based Fifth Third Bancorp they increased 10%. Gains also were posted by Midwestern banks KeyCorp and National City Corp. and Southern banks Synovus Financial Corp. and SouthTrust Corp. At Los Angeles-based Cathay Bancorp Inc., profit rose 5%.
Bank stocks fell by 2% on average nonetheless on cautious remarks about commercial loans from such executives as Bank of America Chief Financial Officer James Hance.
“While we feel positive about consumer and middle-market areas, we are not comfortable with certain segments of large corporate book,” Hance told analysts. The bank is setting aside $1.2 billion to cover bad loans to UAL Corp.’s United Airlines.
Bank of America’s profit rose to $2.61 billion, or $1.69 a share, from $2.06 billion, or $1.28, in the fourth quarter in 2001. Its shares fell $1.03 to $71.45 on the New York Stock Exchange.
Cathay, a business lender that opened a representative office in Shanghai last year as part of its focus on ethnic Chinese clients, said fourth-quarter profit was $12.1 million, or 67 cents a share, up from $11.5 million, or 64 cents, a year earlier. Nonperforming assets fell from $9.5 million to $7.2 million during the year. Its shares fell 31 cents to $39.85 on Nasdaq.
Beverly Hills-based City National Corp., which reported 14.6% higher profit after Tuesday’s market close, saw its stock rise $1.91 to $45.98 on the NYSE. Investors had feared the bank might show big losses on commercial loans, but it met analysts’ earnings forecasts. That caused a “relief rally,” with purchases of its shares by “short sellers” helping drive up the price, RBC Capital Markets analyst Joe Morford said.
