Magazine article American Banker

Charter One Reaps Benefit of Business Lending Boost

Magazine article American Banker

Charter One Reaps Benefit of Business Lending Boost

Article excerpt

Charter One Financial Inc.'s second-quarter earnings were essentially flat from a year earlier but met Wall Street estimates.

On Monday the Cleveland company reported that its earnings rose just 0.19% from the same period last year, to $166 million, or 72 cents a share.

The earnings report was likely the last one Charter One will issue as an independent company. On May 4 it announced plans to sell itself to Royal Bank of Scotland Group PLC's Citizens Financial Group Inc. The $10.5 billion cash deal is scheduled to close in September, and Charter One would become part of the Providence, R.I. unit.

Despite the deal, Charter One went ahead with its aggressive expansion plans, and it reported strong consumer and commercial lending growth. However, even though it beefed up noninterest-bearing deposits, it reported a decline in total deposits.

Charter One was not the only Ohio company to cite poor second-quarter deposit growth. Last week Fifth Third Bancorp of Cincinnati reported that its deposit growth fell short of expectations, and other banks in the state talked about increased competition for interest-bearing deposits.

However, Charles John "Bud" Koch, Charter One's chairman and chief executive officer, seemed upbeat. "This was a strong quarter in terms of retail banking success," he said in the earnings report. "Maybe most importantly, we maintained our earnings level, even though we were $1.6 billion smaller than during last year's second quarter and continued investing in our retail growth initiatives."

Charter One's assets have shrunk over the last 12 months as it has pared back its mortgage business to become more bank-like. It has also repositioned its balance sheet to become less vulnerable to rising rates. In the second quarter, it sold $1.9 billion of mortgage-backed securities, at a loss of $14.2 billion, though some analysts had expected it to report a gain on securities sales. …

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