Bank analysts agree with the head of MNC Financial Inc. that the troubled banking company could make a profit in the fourth quarter, but it won't be easy.
"Yes, I think it is do-able, but you need a clear sign that the real estate market is improving," said David S. Penn, a banking analyst for Legg Mason Inc., a Baltimore stock brokerage firm.
Arnold G. Danielson, president of Danielson Associates Inc., a Rockville-based bank consulting firm, was more optimistic than Penn about the chance for MNC earning money by the end of the year. "I think it's very possible," he said. "I would be disappointed if they weren't."
Alfred Lerner, MNC's chairman and chief executive officer, yesterday told shareholders he "hopes and expects" MNC to be profitable in the last three months of the year.
He also told reporters after the company's annual meeting that MNC "has a shot" at paying dividends sometime in 1992. Dividends were dropped in the 1990 fourth quarter.
MNC, the parent of Maryland National Bank, is the largest bank holding company in the state. The company last year lost $439.5 million, or $5.23 a share, primarily because of bad commercial real estate loans. It made a profit of $154 million in the first quarter, but without the sale of its credit-card division, MNC would have lost about $150 million.
At a meeting attended by about 500 people, Lerner said the bank needs an improvement in the commercial real estate market to become profitable.
"The wild card is what shows up tomorrow that we didn't know about," Lerner said, referring to the possibility of more bad loans.
Lerner said the commercial real estate market should remain about the same during 1991 and possibly improve in 1992.
While many of the questions from shareholders were critical of management, some people complimented the bank officials for dealing with a bad situation.
In fact, the first remark directed to Lerner was from a shareholder who thanked him for "saving this institution." He went on to say that management is "doing a great job."
But other shareholders had more pointed questions. "Where were your dedicated people when you made all these bad loans and questionable transactions," one shareholder asked.
"There is no doubt that mistakes were made," Lerner responded. "We're making sure we have all the right people in place and all the wrong people out of place."
"I thought it was remarkably calm," Penn said. "I was expecting more fireworks."
George Morgan, a shareholder form Chevy Chase, did offer a motion from the floor to reduce the number of directors from 18 to 10 as a cost-cutting measure. But it was soundly defeated, with 70,743 for the motion and 77.3 million votes against it.
During his press conference, Lerner said he was not making a prediction on when dividends would resume, but said, "I think we have a shot at giving a dividend in 1992." But he said it would require a plan to raise capital and federal regulatory approval. "That's going to take a little bit of persuasion," he said.
Banking analyst Penn said it is "unlikely" that a dividend will be paid because regulators are getting more stringent on capital levels. Danielson said it may be more "prudent" for the bank to conserve its capital than to pay a dividend.
While Lerner could see some light at the end of the tunnel, there is still trouble ahead. "I wish I could say the pain is over, but it is not," he told the shareholders. The company earlier this month said it was embarking on a $100 million cost-cutting effort that will result in massive terminations.
"This means that many good employees, through no fault of their own, will lose their jobs," Lerner said. "A leaner, more efficient MNC is absolutely necessary if we are to return to profitability," he said.
Lerner would not give an estimate on how many people would lose their jobs, saying it would be done on a department-by-department basis. Previous reports had estimated that several hundred to 1,000 workers will be terminated in the next several months.
MNC is following the lead of other troubled banks that are trying to reduce expenses and assets.
The new cost-cutting will trim about 15 percent of MNC expenses, according to a bulletin distributed to employees in early May.
The company now has about 9,900 employees. The company had terminated about 700 workers in a period from the summer of 1989 through June 1990 as a result of MNC's acquisition of Equitable Bank N.A. at the end of 1989, according to MNC spokesman Daniel Finney.
The reduction in assets will be accomplished by selling commercial loans, non-performing real estate loans and various remnants of subsidiaries that have been sold to other companies, Finney said.
Lerner said the company is getting closer to picking a new chief executive officer to take over from him. The number of candidates has been reduced to six people outside the company and an unspecified number of candidates within the company, he said.
Lerner said he will continue as MNC chairman for the time being. But he will have to leave that post by the end of next year because under banking regulations he can not continue as chairman of both MNC and MBNA Corp.
Lerner plans to stay at the helm of MBNA, MNC's former credit-card company that was spun off as a publicly traded company early this year.
Since becoming chairman and chief executive officer of MNC last year, Lerner has received only the $546,200 consulting fee he was entitled to as the company's largest shareholder. He owns 8.6 percent of MNC's stock.
Lerner said that his salary will not go up. "They don't print enough money to pay me for this job," he said. "Not that I'm not enjoying it."