Profits at Signet, Loyola rose strongly in 1st quarter

April 20, 1994|By David Conn | David Conn,Sun Staff Writer

The first quarter of 1994 provided a welcome environment for the region's bank and thrift companies, as the slowly resurgent economy offered more lending opportunities.

Signet Banking Corp. of Richmond, Va., whose subsidiaries include Signet Bank/Maryland, and Loyola Capital Corp. in Baltimore both weighed in yesterday with strong first-quarter profits.

But higher interest rates will pose both an opportunity and a threat to banking companies: the chance to raise rates for borrowers, while leaving rates paid on deposits low; but also the threat that borrowing may dry up as a result.

Signet Banking Corp.

Signet said earnings in the first quarter rose to $53.1 million, or 93 cents a share, a 39 percent increase over earnings of $38.3 million, or 68 cents a share a year ago. Earnings were at the high end of analysts' expectations.

Signet's credit card business continued to provide the largest share of the company's profits. Income from credit card servicing, at $76.5 million, was more than 150 percent higher than a year ago. But the cost of soliciting new customers, at $21.4 million, was up 131 percent from last year, and 37 percent from the fourth quarter of 1993.

This month Signet said it was creating a subsidiary for the credit card business and intends to report earnings and expenses for that unit separately from the parent company, which has $11.5 billion in assets and 239 offices. Some analysts suggested the move could be a prelude to an eventual public spinoff of the business, which has been growing rapidly for several years.

"During the [first] quarter, we added almost $800 million in card receivables through our innovative approach to attracting and retaining very high-quality, profitable customers," Signet's chairman and chief executive officer, Robert M. Freeman, said in a statement.

The first-quarter earnings also benefited from improved credit quality, which allowed Signet to cut by nearly two-thirds the amount of money set aside to cover future loan losses.

Loyola Capital Corp.

Loyola, parent of Loyola Federal Savings Bank, also reported improved operations during the quarter. Earnings climbed 16 percent, to $3.5 million, or 40 cents a share, from $3.0 million, or 35 cents a share, in the first quarter of 1993.

Loyola also showed strength in its mortgage business, as income from mortgage securities climbed to $3.7 million from next to nothing a year ago.

"In particular, we are pleased with the continued progress of our mortgage banking operations in South Carolina, which produced over $51.4 million in mortgage loans this quarter," Chairman and Chief Executive Officer Joseph W. Mosmiller said in a statement.

"We hope to repeat this success in our lending operations in Alabama, Virginia and in a new mortgage subsidiary in South Florida," Mr. Mosmiller said.

Whether the company can do that may depend on how consumers react to the higher interest rate environment. "They've got to generate consumer loan growth" in addition to mortgages, said Legg Mason Inc. analyst Janet McCabe.

"Last year they were having trouble showing any loan growth at all, because their customers were pre-paying" both adjustable and fixed-rate mortgages, Ms. McCabe said.

Still, she said, Loyola represents one of the few remaining banking companies with a branch system in Baltimore, and that could attract a takeover bid.

Loyola Capital Corp.

. .. .. .. .. ..Ticker.. .. .. .. .. .. .. Yesterday's

. .. .. .. .. ..Symbol .. .. .. .. .. ..Cls.. .. .. Chg.

. .. .. .. .. ..LOYC .. .. .. .. .. .. .21.. .. .. ...- 1/2

Period ended

3/31/94 .. .. .. .. .. ..1st qtr.. .. Year ago.. .. .. .. .. .. .. Chg.

Net Income .. .. .. .. ..$3,490 .. .. $3,012 .. .. .. .. .. .. ..+15.9%

Fully diluted EPS.. .. .. $0.40 .. .. .$0.35 .. .. .. .. .. .. ..+14.3%

Annualized return

on avg. assets .. .. .. ..0.60% .. .. ..0.68% .. .. .. .. .. .. .. --

Add. to allowance

for loan losses * .. .. .$1,068 .. .. ..$1,891 .. .. .. .. .. .. .-43.5%

.. .. .. .. .. .. .. ..Balances as of .. .. .. .. .. .. .. ..3/31/94.. .. .. .. .. .. .. .. 3/31/93

MAssets .. .. .. .. ...$2,273,476 .. .. .. .. .. .. ..$1,771,784.. .. +28.3%

Deposits .. .. .. .. .$1,406,309 .. .. .. .. .. .. ..$1,431,920 .. ..-1.8% Loans outst. .. .. .. $1,581,364 .. .. .. .. .. .. ..$1,314,621 .. ..+20.3%

Loan loss

reserve ** .. .. .. ..$26,576 .. .. .. .. .. .. .. ..$26,072 .. .. .. +1.9%

Figures in thousands (except per share data.)

* Includes addition to allowance for real estate losses, which Loyola reports separately.

** Includes real estate loss reserve.

Signet Banking Corp.

. .. .. .. Ticker.. .. .. .. .. .. Yesterday's

.. .. .. ..Symbol.. .. .. .. .. .. Cls.. .. .. ..Chg.

.. .. .. . SBK .. .. .. .. .. .. ..42 3/8 .. .. .. .+ 3/8

Period ended

3/31/94.. .. .. .. ..1st qtr.. .. .. ..Year ago.. .. .. .. .. .. .. Chg.

Net Income .. .. .. $53,113 .. .. .. ..$38,267 .. .. .. .. .. .. ..+38.8%

Primary EPS .. .. .. ..$0.93 .. .. .. .$0.68 .. .. .. .. .. .. ..+36.8%

Annualized return

on avg. assets.. .. .. 1.90%.. .. .. ..1.39% --

Add. to allowance

for loan losses .. .. $5,499.. .. .. ..$15,498.. .. .. .. .. .. ..-64.5%

Balances as of

dTC .. .. .. .. .. .. 3/31/94 .. .. .. .. ..3/31/93

Assets .. .. .. ..$11,529,575 .. .. .. .$11,520,186.. .. .. .. +0.1%

Deposits .. .. .. .$7,934,684 .. .. .. .$7,585,535 .. .. .. ..+4.6%

Loans outst. .. .. $5,074,738 .. .. .. .$6,304,535 .. .. .. ..-19.5%

Loan loss

reserve .. .. .. ..$250,477 .. .. .. .. .. .. $273,283.. .. .. .. ..-8.3%

Figures in thousands (except per share data.)

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