Continued economic strength in the South pushed NationsBank Corp.'s earnings higher in the first quarter, but signs of a slowdown in the Northeast dampened profit growth at First Fidelity Bancorp.
Both companies exceeded Wall Street's expectations, and joined a cadre of major regional banks that reported strong earnings yesterday, including First Chicago Corp., Bank of New York Co. and First Interstate Bancorp. Only Chase Manhattan Corp., the nation's sixth-largest banking company, saw earnings decline in the quarter from a year earlier.
For Charlotte-based NationsBank, Maryland's biggest banking company and the country's fourth-largest, first-quarter earnings rose 6.2 percent to $443 million, or $1.60 a share, from $417 million, or $1.52 a share a year ago.
"This quarter represents an excellent start to the year," said Chairman and Chief Executive Hugh L. McColl Jr. "Strong loan growth continued to drive earnings growth, along with increasing fee income."
Still, NationsBank's stock dropped 75 cents a share, to $51, partly based on a lowered recommendation from Alex. Brown analyst Mark Alpert, who said he was concerned about the company's reported interest in acquiring Chase Manhattan.
NationsBank, which had $184 billion in assets, said commercial lending led a 13 percent increase in average loans and leases compared with a year ago. Even though the company saw a slight drop in its net interest margin, or the spread between deposit and loan rates, its net income from lending activities rose $25 million to $1.34 billion.
At the same time income from fee-based operations, such as investment banking and mortgage servicing, rose 7 percent to $726 million. NationsBank's loan quality improved in the quarter, prompting the company to set aside $70 million to cover future loan losses, down from $100 million a year ago. Those set-asides are deducted from earnings.
Nancy A. Bush, an analyst with Brown Brothers Harriman & Co. in New York, said NationsBank turned in a solid first quarter, with good prospects for the immediate future.
"They're in the best of all possible worlds right now," Ms. Bush said, noting that loan demand is up, credit quality is good, and income from fee-based products is on the increase.
"I think we're seeing with them sort of the critical mass" that has come from the company's many acquisitions. "You get better commercial loan pricing if you can offer such a variety of [financial services] products," she said.
First Fidelity, based in Lawrenceville, N.J., is beginning to see weaker loan demand, and therefore some pressure on its prices.
The company's first-quarter earnings of $112.9 million, or $1.32 a share, were 3.7 percent higher than earnings of $108.9 million, or $1.26 a year ago.
The earnings were slightly higher than Wall Street analysts had expected, but the company's stock fell $1 a share, to $48.625, because of concerns about growth.
"Because of slower-than-expected loan demand in the Northeast, continued attention to asset quality and expense control remain major factors in the company's earnings strength," said Chairman and Chief Executive Tony Terracciano.
Like NationsBank, First Fidelity suffered a decline in its net interest margin. But a slight increase in overall loans wasn't enough to offset stagnant demand for the higher profit business loans.
"Quality business loan demand in the Northeast region was essentially flat during the first quarter, compared with good growth in the latter half of last year," the company said.
The biggest share of the earnings increase came from First Fidelity's loan loss reserve, which fell $14 million to $10 million in the quarter.
"It was just not a quarter of strength," said Ms. Bush, of Brown Brothers Harriman. "It's going to be tough for them to grow in the absence of doing [acquisition] deals. That's been their area of growth for the past few years," she said.