Financial takes quarterly loss of $59 million

BAD, BUT BETTER MNC

October 18, 1991|By Peter H. Frank

MNC Financial Inc., the largest banking company in Maryland, reported a loss of $59 million yesterday as the company's third-quarter results continued to be overtaken by real estate lending woes.

But the company, parent of Maryland National Bank and American Security Bank in Washington, showed some signs that the crush of worsening real estate problems that sent MNC reeling over the past year had abated significantly.

The third-quarter loss, equal to 70 cents a share, compared with a loss of $173 million a year ago and an $82 million loss in the second quarter of this year. The improved results were partly due to efforts to pare costs. MNC has reduced its work force by 1,100 people, or roughly 15 percent, since March.

Analysts, citing the lingering softness in the commercial real estate market, expected the loss at MNC and found little in the company's statement that was not anticipated. MNC's shares, traded on the New York Stock Exchange, closed at $4.50 a share, up 37 1/2 cents.

"It's probably one of the most unremarkable earnings releases they've had over the past year -- no surprises, nothing out of the blue, everything was sort of what you thought it would be," said David S. Penn, an analyst with Legg Mason Inc. in Baltimore. "The acid test really comes in the first half of next year, when the company believes that it can break even possibly."

After losing $440 million last year, MNC rebounded to profitability in the 1991 first quarter, thanks to a large gain from the sale of its prized credit-card subsidiary, MBNA Corp. Excluding the proceeds from the sale, MNC would have lost about $200 million for the quarter, according to company estimates.

While many of the numbers released yesterday suggested that problems were abating or holding steady, analysts said that the company could not return to profitability on a continuing basis until MNC's troubled loan portfolio stopped eating away at the company.

"They're treading," said Elisabeth Albert Hayes, a banking analyst with Chapin, Davis & Co. "But it's too early to tell anything. There's deterioration, but everybody's experienced deterioration."

Ms. Hayes said that fourth-quarter results could be a key indicator for next year as federal regulators, who began their annual examination of MNC's banks last week, complete their look and report their findings to the company.

MNC officials, pointing to a relatively small growth in troubled assets during the quarter, were upbeat about the losses. They said they expected a $100 million cost reduction plan begun this year to be in full effect by the start of 1992 and that results would improve.

"Fifty-nine is better than 82, and that's better than 200," said Frank P. Bramble, president and chief executive officer of MNC, referring to the company's quarterly results this year. "We're on our way back."

The company has about $10 million to $15 million in cost-cuts remaining.

MNC set aside $75.3 million during the quarter to cover the cost of future problem loans. That compared with $350 million set aside for the same year-ago period.

MNC said its capital ratios were well above levels required by regulators at the end of the quarter.

Three months ended 9/30/91

... Income ... ... ... ... ... ... ... Share

'91 (59,480,000) ... ... ... .. .. .. (0.70)

'90 (173,387,000) .. ... ... .. .. .. (2.05)

% change NA ... ... ... ... ... ... .. NA

... Assets ... ... ... ... ... ... ... Deposits

'91 18,399,064,000 .. ... ... ... ... 14,868,831,000

'90 27,168,517,000 .. ... ... ... ... 20,228,855,000

% change ... -32.3 ... ... ... ... ... -26.5

Nine months ended 9/30/91

... Income ... ... ... ... ... ... ... Share

'91 12,218,000 .. ... ... ... ... ... 0.08

'90 (241,908,000) ... ... ... ... ... (2.91)

% change NA ... ... ... ... ... ... .. NA

Portfolio (three months ended 9/30/91)

... Loans outstanding ... ... ... ... ... ... Net charge-offs

'91 11,150,313,000 .. .. ... ... ... ... ... 66,114,000

'90 16,493,432,000 .. .. ... ... ... ... ... 104,247,000

% change -32.4 ... ... ... ... ... ... .. ... -36.6

Addition to allowance ... ... ... ... ... ... Allowance

for loan losses ... ... ... ... ... ... ... ... for loan losses

L '91 75,344,000 ... ... ... ... ... ... ... ... 840,375,000

L '90 350,000,000 .. ... ... ... ... ... ... ... 790,839,000

% change -78.5 ... ... ... ... ... ... ... ... +6.3

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