Magazine article American Banker

Chase, Irving Up Sharply; Morgan Flat

Magazine article American Banker

Chase, Irving Up Sharply; Morgan Flat

Article excerpt

NEW YORK -- Earnings were up 24% at the Chase Manhattan Corp. and 33% at the Irving Bank Corp. in the fourth quarter of 1985, but J.P. Morgan & Co. posted flat earnings compared with the year-earlier period, the New York-based companies reported Monday.

Net income totaled $151 million at Chase, or $3.48 a share, up from $120 million, or $2.56 a share, in the fourth quarter of 1984.

Morgan's net income was $174 million, up 3.9% from $167.5 million in the fourth quarter of 1984. Per-share income was $1.90 in both quarters.

Irving reported net income of $28.2 million, or $1.49 a share compared with $21.1 million, or $1.04 per share, for the fourth quarter of 1984. The per-share increase -- 38% -- was higher than the rise in net income because dividends on preferred stock were lower in 1985, leaving higher earnings available to common shareholders.

Chase's fourth-quarter results also bettered its performance in the third quarter of 1985, when it earned $149 million. Irving fell short of the $29.1 million it earned in the third quarter, while Morgan's results represented a decrease from the $209 million earned in the third quarter.

Analysts had expected most major money center banks to earn less in the fourth quarter than in the preceding quarter because interest rates did not drop as much. Also, noninterest income, especially in areas such as foreign exchange and bond trading operations, was not expected to be as strong as in the third quarter.

Morgan credited its 3.9% increase in net income to higher net interest and noninterest earnings and lower income taxes. The company said these factors were partially offset by higher noninterest expense and an increased loan loss provision.

Morgan, which has taken a lead among banks in building its reserves, continued to increase its loan loss reserve relative to its total loans. The company's allowance for possible credit losses totaled $793 million at yearend 1985, equaling 2.14% of total loans. This compared with $755 million, or 2.02% of loans, at Sept. 30, and $583 million, or 1.63% of loans, at yearend 1984.

Industry observers, especially those concerned with debt to less-developed countries, had been waiting to see how much Morgan would build its reserve in the fourth quarter. Some analysts believed that if Morgan continued to add aggressively to its reserves, it could be seen as a signal of further shocks in the international debt situation.

However, Morgan added less to its loan loss reserve in the fourth quarter, allocating only $27 million in excess of net loan chargeoffs. In the third quarter of 1985, Morgan set aside $125 million, with only $35 million in chargeoffs.

The company said its allowance was "maintained at a level that management believes is adequate to absorb losses that may result from the uneven economic recovery both in the U. …

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