Magazine article American Banker

First Chicago Gains on Surprisingly Strong Second-Quarter Profits

Magazine article American Banker

First Chicago Gains on Surprisingly Strong Second-Quarter Profits

Article excerpt

A stronger-than-expected earnings report Wednesday apparently allayed investors' concern over First Chicago Corp.'s trading business, propelling the company's stock $1 higher, to $49.

"First Chicago did better in the second quarter than investors expected," said Sanford C. Bernstein & Co. money-center analyst Ronald I. Mandle. "I'm raising my estimate for this year 25 cents."

Sizable Trading Gain

The company reported second-quarter net income of $168.7 million, or $1.67 per share, fully diluted, compared with $168.5 million, or $1.72 per share, a year ago.

The earnings included a $37 million gain on trading for the quarter in contrast to a $25 million loss in the first quarter.

Mr. Mandle said the Chicago bank's quarterly earnings were impressive, but they weren't as spectacular as the bank made them out to be.

"Their core earnings were closer to my estimate of $1.40 per share, not-the $1.67 they reported because they included the Brazilian debt," he said.

During the second quarter, First Chicago received Brazilian bonds as part of a debt restructuring, adding $32 million to pre-tax earnings.

Less than Meets the Eye?

Prudential Securities analyst George Salem agreed that the bank's earnings were deceiving.

"First Chicago did a little better than expected," he said. "But it wasn't as good as the $1.67 would lead you to believe. They had no equity gains, as they normally do. I get about $1.35 or $1.40."

Barnett Banks Inc., which reported earnings in line with expectations, was up 12.5 cents on the day at $23.875.

Earlier in the week SunTrust Banks Inc. reported better than expected earnings - $1 per share - prompting another Bernstein analyst, Moshe Orenbuch, to raise his earnings estimate by 5 cents for this year and 10 cents for 1995.

Stock of SunTrust, which announced earnings Tuesday, was unchanged at $47. …

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