Newspaper article THE JOURNAL RECORD

Banks Start Year on Positive Note

Newspaper article THE JOURNAL RECORD

Banks Start Year on Positive Note

Article excerpt

NEW YORK _ Most banks will end 1994 on a positive note, with higher profits, analysts predict. But New York and some large regional banks will be hit by weak financial markets and rising interest rates.

The outlook for 1995 in banking is cloudy. Further interest rate hikes are expected to depress investment profits, while competition will force many banks to pay consumers more for their deposits and keep loan rates low.

"Consumers will have an advantage," said William Arnold, a principle at the Atlanta office of Towers Perrin, a national consulting firm. "Competition won't permit banks from raising their loan prices as rapidly as the cost of their funding."

Banks will report earnings for the final quarter of 1994 during the next two weeks, and while performance will vary widely from bank to bank, analysts estimate that banks will earn 13 percent to 15 percent more per share than a year ago.

Although many banking companies were hurt by higher interest rates, a healthier real estate market allowed them to get rid of bad loans that were eating into profit margins.

Banks that have set aside millions of dollars as provisions against realty loan losses were able to free up those funds this year or add less money to the funds compared to last year, and the benefit flows right to the bottom line.

Lower provisions at banks such as Wells Fargo Co. and First Interstate Bancorp will drive earnings per share up 30 percent to 40 percent in the fourth quarter compared to the same quarter last year, analysts predicted.

Chris Kotowski, a bank analyst at Oppenheimer Co., estimated that Wells Fargo's loan loss provision will fall to $25 million from $80 million last year, pushing the San Francisco bank's earnings per share up to $4.21.

Wells Fargo earned $3.18 a share last year. First Interstate earned $1.90.

Kotowski estimated that the nation's top 30 banks will on average see earnings per share jump 13 percent because of lower provisions and because industry fundamentals _ lending, consumer services, investments _ were strong. …

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