Mercantile profits up 6%, continuing solid results Ailing banks likely to show big gains

July 14, 1992|By David Conn | David Conn,Staff Writer

Mercantile Bankshares Corp. said yesterday that its earnings increased by 6 percent in the second quarter as the Baltimore-based banking company, parent of Mercantile-Safe Deposit & Trust Co., continued its string of solid profits.

The increase was not as great as those expected from the industry's troubled bank holding companies, which will compare their earnings with some dismal results a year ago.

To the contrary, Mercantile was turning in solid profits when many other banks were bleeding millions of dollars each quarter.

"Lots of times, boring is beautiful," Legg Mason Inc. bank analyst David Penn said of Mercantile's numbers. "Now that so many other banks are reporting big upswings, it's just boring. But that's OK."

In the quarter ended June 30, Mercantile reported $18.8 million in earnings, or 62 cents a share, compared with income of $17.7 million, or 59 cents a share, a year ago. For the six-month period, earnings topped $37.6 million, or $1.24 a share, compared with $36.2 million, or $1.21 a share.

Its return-on-assets was a solid 1.45 percent for the quarter.

At the end of the second quarter, deposits were up 6 percent to $4.4 billion. Assets rose 4 percent to $5.2 billion at Mercantile. The company also owns 15 small banks in Maryland and a mortgage company in Baltimore, as well as three banks in Delaware and Virginia.

Mercantile was no different from most other banks in at least one respect: the lion's share of its second-quarter earnings, compared with the second quarter of 1991, came from the sharp drop in interest rates during the past year.

While interest income fell 8 percent to $101.4 million and non-interest income fell 12 percent to $19.7 million, the company still reported a 6 percent increase in net income, even with a 14 percent increase in non-interest expenses.

The answer lies in Mercantile's interest expense. With the federal funds rate, the rate banks pay for overnight money, dropping by half in the past year to about 3 percent, banks have seen their interest expenses fall in tandem.

Three months ended 6/30/92

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

'92 ....18,787,000 .......... 0.62

'91 ....17,701,000 .......... 0.59

% change...... +6.1 ........... +5.1

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

'92..... 5,220,876,000..... 4,365,749,000

'91..... 4,999,891,000..... 4,134,436,000

% change ......... +4.4......... +5.6

Loan portfolio

Six months ended 6/30/92

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

'92.... 3,468,579,000...... 2,381,000

'91.... 3,317,398,000...... 4,660,000

% change .........+4.6 ......... 51.1

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

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

'92.... 6,880,000........ ........ 70,431,000

'91.... 10,255,000....... ........ 60,066,000

% change...... 32.0....... ........... +17.3

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