Magazine article American Banker

Big Banks Seen Growing despite Drop in Profitability

Magazine article American Banker

Big Banks Seen Growing despite Drop in Profitability

Article excerpt

Pr0fitability for the nation's largest banks declined in the first quarter, an American Banker survey found. But analysts insisted the industry remains strong and predicted future growth.

The survey, which looked at 61 banks, revealed that money-centers, banks with $70 billion or more in assets, earned a return on average assets of 1.02%, while in the same period last year they earned 1.11%.

Superregional banks, those with more than $20 billion in assets, saw returns on average assets drop, too. In the first quarter of 1993, the return on average assets for these banks reached 1.23%. This year they fell to 1.19%. Return on average equity also dropped for these two groups along with their net interest margins.

These numbers were rough on bank stocks this quarter. The ratio of market to book value declined to 126% from 160.2% in the first quarter of last year.

At first glance, all these figures appear bleak, but analysts said these drops do not worry them. Banks are "still performing extremely well," said SNL Securities analyst Scott Winslow. "They're still very healthy. They're still earning a lot of money."

The industry posted a net income of $10.4 billion in the first quarter, only slightly lower than the two previous quarters, Mr. Winslow said.

To compare these figures to 1993 is unfair to banks, he said, because bank profitability broke records last year. In the third quarter of 1993, the return on average assets was 1.27%, the highest ever for the industry.

Last year was such a good year "you kind of think that there'S no place to go but down," Mr. Winslow said.

Instead, the figures should. be compared to those of 1991, when the industry was weakened by nonperforming assets and mired in a nationwide recession, he said. That year return on average assets for the industry was a dismal 0. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.