Back on its feet, MNC hopes to make strides

FACING THE CHALLENGES OF THE NEW YEAR

January 03, 1993|By David Conn

For many investors, any questions about MNC Financial Inc.'s health and viability ended last July, when NationsBank Corp. of Charlotte, N.C., invested $200 million in the Baltimore company, with the option to buy it any time in the next five years.

But when NationsBank will exercise that option depends on the progress of MNC's struggle toward full recovery.

MNC has made great strides since the depth of its problems in 1991. At its worst point, MNC had nearly $1.9 billion in non-performing loans, it lost more than $80 million in one quarter, and its stock traded as low as $1.875 a share.

But with a focus on restructuring and selling nonperforming assets -- and with the cash infusion from NationsBank -- MNC has stabilized. In the first three quarters of 1992, MNC earned $7.6 million, and its nonperforming assets were down to $1.25 billion by Sept. 30.

The stock ended the year at $12.875.

MNC now must focus on the business of making loans and profits. But since profits in the last year were driven as much by the fall in interest rates as by reduced expenses, the company's challenge in 1993 might be even greater than last year's.

Interest rates are likely to remain the same, or even rise, which would squeeze banks' net interest margins. And a regional economy undergoing an anemic recovery is unlikely to generate much demand for loans.

But MNC still has the largest banking franchise in the state, and if loans are to be made, the company will get its fair share. Also, MNC should be able to run much faster having rid itself of almost half its bad loans.

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