Advertisement
News

Merc's profit rises 6.5%

Mercantile Bankshares Corp. said yesterday that its second-quarter earnings rose 6.5 percent even as a difficult economy and low interest rates continued to hamper growth in areas such as commercial lending.

Mercantile posted net income of $50 million for the quarter that ended June 30, compared with $46.9 million in the second quarter last year.

Advertisement

Earnings per share were 72 cents on a fully diluted basis, a rise of 7.5 percent from 67 cents a year earlier. Wall Street analysts had been expecting Mercantile to earn 71 cents a share.

"I think under the circumstances, under the economic conditions, we did very well," said Edward J. Kelly III, Mercantile's chairman, president and chief executive officer.

Advertisement

Like many banks, Mercantile has suffered from record low interest rates that have been good for consumers but bad for bank revenues.

"Even if we grow loans, because the margins have shrunk the earnings are lower," Kelly said. "We're still making money, but it's not a matter of making money. What matters is if we can grow earnings."

Henry J. Coffey, an analyst with Ferris, Baker Watts Inc., said Mercantile performed as well as it could during a slow economic climate.

"Given the way the market is, they were pretty much in line with what we've seen with a lot of banks," Coffey said.

Total loans increased 6 percent to $7.6 billion from last year's second quarter. Total deposits rose 12 percent to $8.6 billion, while total assets gained 13.2 percent to $11.5 billion.

During a conference call with analysts, Kelly noted the pending merger with F&M; Bancorp of Frederick. The $505 million deal, expected to close in the third quarter, will boost Mercantile's assets by $2 billion.

But Todd Hagerman, an analyst with Fox-Pitt, Kelton Inc., said that Mercantile would have a hard time maintaining earnings with the acquisition.

"With expectations for a persistent low-interest rate environment, it will be tough on the company's earnings," he said. "The acquisition is also incremental to that picture. Mercantile has never done an acquisition this big, so it's certainly not without its own challenges."

Advertisement

Mercantile's shares gained a penny to close at $41.16.


Advertisement