Magazine article American Banker

Brokers Are Lowering Earnings Forecasts for First Interstate

Magazine article American Banker

Brokers Are Lowering Earnings Forecasts for First Interstate

Article excerpt

Over the last month and a half, at least five stock analysts have trimmed their earnings estimates for First Interstate Bancorp.

The changes, which were made after discussions with management of the $57 billion-asset bank holding company, are based primarily on expectations that deposits and earning assets will grow at a slower rate than had been anticipated.

"They're not a surprise to us," said Christine McCarthy, an executive vice president of Los Angeles-based First Interstate. "Any analyst who has called us over the last six to eight weeks has been given the same guidance."

The investment banking and brokerage companies that have reduced

earnings estimates include Brown Brothers Harriman & Co., Dain Bosworth Inc., Merrill Lynch & Co., Sanford C. Bernstein & Co., and Smith Barney Inc.

According to Ms. McCarthy, the driving force behind the reductions is a larger-than-expected decline in deposits in money market and NOW accounts.

These deposits accounted for $6.8 billion of First Interstate's average total deposits of $48 billion in the first quarter.

Ms. McCarthy did not say how much these deposits are expected to decline in the second quarter, but she explained that First Interstate officials believe that customers have been shifting some of that money to money market mutual funds that are paying higher returns. First Interstate does not believe the deposits are flowing to bank competitors.

Ms. McCarthy said the outflow has been declining recently. This is because most of the customers that would move their money already have done so. …

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