Magazine article American Banker

Deposits Drove Quarter: Charter One Shows How Basics Led 1Q Growth

Magazine article American Banker

Deposits Drove Quarter: Charter One Shows How Basics Led 1Q Growth

Article excerpt

A deposit boom and conditions that favored consumer lending helped regional banking companies overcome stagnant commercial loan growth in the first quarter, and several of the biggest U.S. banking companies used retail growth to post better-than-expected results.

Deposits grew an average of 8% to 9% from a year earlier -- including average growth of 12% to 13% in low-cost demand deposit accounts, according to research by Goldman Sachs Group Inc. That growth, plus a steep yield curve, eased pressure on net interest margins, which were pinched by rate decreases last year.

On Monday, Charter One Financial Inc., the last of the 25 biggest U.S. banking companies to report first-quarter profits, reported that it hit its targets. Earnings rose 22% from a year earlier, to $140 million, or 62 cents a share.

The $38 billion-asset Cleveland company credited the growth to a 25% increase in overall deposits, to $25.6 billion, and reaffirmed its full-year earnings guidance of $2.50 to $2.55 per share.

Charter One joined a list of companies that emphasized basic banking and fared well amid low interest rates and still-shaky financial markets.

While some of the biggest U.S. banking companies, including Citigroup Inc., fell short of earnings targets because of weakness in the capital markets and losses from operations abroad, others, including SunTrust Banks Inc., Wells Fargo & Co., KeyCorp, National City Corp., and Union Planters Corp., beat expectations.

Charter One is shedding its original identity as a thrift relying heavily on single-family mortgage loans for growth. (On Monday it cleared another regulatory hurdle in that transition, when the Federal Reserve approved its application to form a bank holding company to house its national bank.)

Jason Goldberg, an analyst at Lehman Brothers, said the company has accelerated its transformation by hiring some key executives with commercial banking experience, shifting to an equity-based incentive compensation program, and easing up on thrift acquisitions. …

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