NationsBank Corp. said yesterday that its second-quarter earnings rose 7 percent, as the Charlotte, N.C., banking company said it boosted its loan base at an annual 16 percent rate but saw profits grow more slowly because of narrower interest rate spreads and big concentrations of new business in less profitable parts of the company.
NationsBank said it earned $467 million, or $1.71 a share, during the three months that ended June 30. It earned $437 million, or $1.58, in the same months of 1994.
The company had been expected to earn $1.66 a share, according to the average estimate of 25 analysts polled by Zacks Investment Research.
"It was a good number," said Merrill Ross, banking analyst at Wheat First Butcher Singer in Richmond, Va. "I look for better."
One reason profits grew more slowly than loans, Ms. Ross said, is that NationsBank still is saddled with about $4 billion in low-yielding Treasury securities it bought near the bottom of the interest rate cycle in 1993.
Those bonds, which have lost value as interest rates have risen, mature this summer, she said. When they do, NationsBank is expected to invest the money in ways that get much better returns -- enough to boost the overall profits of the nation's third-largest bank, which has $184.2 billion in assets.
NationsBank said some key profitability ratios were actually lower than a year ago -- suggesting the bank's gains came more from increasing size than efficiency. But executives said the quarter showed the bank is strong enough to post earnings gains even in less favorable conditions.
"It was an excellent quarter for all the right reasons," Rusty Page, NationsBank senior vice president for investor relations, told a nationwide tele-press conference. "The margin is not the be-all and end-all it used to be."
Ms. Ross agreed, arguing that smaller banks that have posted stronger profits than NationsBank "are not in the same lines of business as NationsBank."
Ms. Ross said NationsBank added $4.9 billion in residential mortgage loans in the last year and $5.6 billion in commercial loans, making up the lion's share of its loan growth.