Several Banks Show Rebound From Deficits --- Lower Loan-Loss Expenses, Other Factors Revived Profits in Third Quarter --- A Wall Street Journal News Roundup
Earnings at several major banks rebounded from the heavy losses in the second quarter that resulted from industrywide increases in loan-loss reserves.</br></br>Sharply lower loan-loss provisions, tax benefits and some one-time gains helped to buoy third-quarter earnings rises at the banks, particularly Chicago-based Continental Illinois Corp., where earnings rose 46% from a year earlier. Jacksonville, Fla.-based Barnett Banks Inc. and New York-based Bank of New York Co. both reported record earnings. Boston-based Bank of New England's profit rose 8.4%.</br></br>The major exception to the improved outlook was New York-based Chemical New York Corp., the nation's fourth-largest bank holding company, which reported a quarterly loss for costs associated with the elimination of 2,100 jobs in its Chemical Bank unit.</br></br>Securities analysts, however, remain concerned about basic loan demand. Brent Erensel of Dean Witter Reynolds Inc. noted: "Lending volume generally isn't robust. Margins are down because of the new tax law and the suspension of interest payments by Brazil." On the other hand, he said, loan portfolio quality is improving, and banks are getting a better grip on controlling expenses.</br></br>James McDermott of Keefe, Bruyette & Woods Inc. said: "Based on what we are seeing at Chemical and elsewhere, clearly some banks are still in the throes of restructuring. When you strip things away, you find expenses remain high and margins are thinner."