Newspaper article THE JOURNAL RECORD

Bank Profits Should Rise about 20%

Newspaper article THE JOURNAL RECORD

Bank Profits Should Rise about 20%

Article excerpt

By Rob Wells

Associated Press

NEW YORK _ Forget, for a moment, that bank lending is dormant and depositors are leaving the marbled lobbies, cash in hand, to funnel their savings to mutual funds or stocks.

Those trends won't diminish the billions in profits the nation's banks are expected to report when their second quarter earnings are announced later this month, analysts said Thursday. Some observers expect bank earnings to be up about 20 percent from the second quarter of 1992.

The ingredients for the banking industry's rebound remain firmly in place: low interest rates, an improving real estate market, increased efficiency and lower operating costs.

"Banks' earnings have done very well for all of those reasons and I don't see any reason for them to change," said Eugene J. Sherman, director of research at M.A. Shapiro Co. Inc., a New York brokerage firm.

Frank Barkocy, senior vice president at Advest Inc. and a specialist in regional banks, agreed.

"If you look at the litany that generated the first quarter gains, we have that (again) in the second quarter," Barkocy said.

The positive forecasts are reflected by Standard Poor's Corp.'s decision in the second quarter to upgrade its ratings on 11 commercial banks while downgrading only one.

Several analysts said trends will roughly track the record first quarter of 1993. The industry earned an aggregate $9 billion profit in the January-March period and 95 percent of the nation's 11,315 banks were profitable, according to Sheshunoff Information Services Inc. of Austin.

Those gains came despite a 2.5 percent first-quarter decline in deposits and a decline of about 1 percent in total loans. Sherman said he expects loan demand to remain lackluster for the remainder of 1993, as businesses continue to overhaul their balance sheets.

That trend is offset by gains in efficiency and declining interest rates, he said.

"Loan demand is not the great hope for bank earnings," said Sherman, former chief economist at the Federal Home Loan Bank Board in New York. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.