Magazine article American Banker

Profits at the Top Banks Rose 8.8% Last Year, but Some Took Rate Hit

Magazine article American Banker

Profits at the Top Banks Rose 8.8% Last Year, but Some Took Rate Hit

Article excerpt

Earnings for 1994 were up 8.8% at the nation's largest bank holding companies, according to an American Banker survey.

A look at the top 100 banks in assets revealed that full-year net income for the group increased to $33.4 trillion, up from $30.7 trillion in 1993. The year was a mixed bag, analysts said. Some banks, like Minneapolis based Norwest Corp. and Bank of Boston Corp., capitalized on cost cutting, wide net interest margins, and healthy loan growth.

At the same time, bad plays on interest rates hurt others. Two victims, Columbus, Ohio-based Banc One Corp. and Pittsburgh-based PNC Bank Corp., "lost a third of their earnings power because of interest rate problems," said Duff & Phelps analyst Claire Percarpio.

Some banks in the Northeast and Middle Atlantic states saw weak earnings because of sluggish loan and revenue growth. These included Philadelphia based CoreStates Financial Corp. and PNC.

"CoreStates and PNC are very good examples of not booking as many loans as they had budgeted because they did not want to lower their credit standards," Ms. Percarpio said.

Overall, analysts said earnings were strong this year for the biggest 100 banks. Banks have not seen healthier asset portfolios in a long time, and they're profitability keeps getting better, analysts said. "We've certainly seen a narrowing in the gap of profitability between the very large banks and the midsize or smaller banks," Ms. Percarpio said. The more profitable community banks can achieve ROAs as high as 2% or better, she said. …

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