Signet, Loyola earnings increase in 2nd quarter

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

The power of consumer borrowing fueled strong results at two area financial institutions as both Signet Banking Corp. and Loyola Capital Corp. reported double-digit earnings gains yesterday for the three months ended June 30.

Signet's numbers came in below investors' expectations, however, and the company's stock lost almost 11 percent of its value yesterday amid a general sell-off of bank stocks.

Both companies enjoyed lower costs associated with soured loans and foreclosed real estate. But the main reason for their increased profits was a marked rise in consumer lending of all kinds -- credit cards, mortgages and automobile loans.

That could prove to be a double-edged sword, especially "if the consumer gets too tapped out," said Joan T. Goodman, an analyst at Chicago-based Pershing, a division of Donaldson, Lufkin & Jenrette. While "certain companies are growing earnings, a lot of people are worried about losing their jobs," she said.

Signet Banking Corp.

The story for the Richmond-based banking company continued to be its credit card division, which again provided most of its revenue gains during the period.

Signet reported a profit of $50.4 million during the second quarter, or 88 cents a share, up 26 percent from a year ago.

Robert M. Freeman, Signet's chairman and chief executive, said the earnings were helped by strong growth in the bank's credit card portfolio and a continuing improvement in the quality of loans.

In a phone call with analysts, the company mentioned that it doesn't expect its credit card marketing costs to rise as quickly next year as they have this year. And, it said, a decision on whether to sell its credit card business to the public should come in the third quarter.

Still, the earnings, which were announced early yesterday morning, fell below analysts' expectations of about 93 cents a share for the quarter. They also declined 5 percent from the first quarter of this year, partly because of a reduction in the difference between the amount Signet makes lending money and the amount it pays for deposits. That prompted an unidentified stockholder to sell a large block of shares as the market opened. The stock never recovered, ending the day $4.375 lower, at $36.50 a share.

"But still, looking at other banks I look at, this bank had superb earnings," said Ms. Goodman.

Loyola Capital Corp.

This Baltimore-based parent of Loyola Federal Savings Bank reported a 15 percent rise in earnings in the second quarter. Profits reached $3.6 million, or 42 cents a share, up from $3.2 million, or 36 cents a share a year ago.

Loyola made much of its money in the quarter from a larger portfolio of mortgage loans on its books. Even though the thrift originated only $209 million in mortgages, down from $356.7 million a year ago, more customers were taking out adjustable rate mortgages, which Loyola retains, rather than selling on the secondary market, said Executive Vice President James V. McAveney.

The company also reported $3.7 million in revenues from a package of mortgage-backed securities it bought last fall.

On the expense side, Loyola's level of assets considered troubled fell to $33 million from $39 million a year ago. That allowed the company to set aside only $180,000 to reserve against future loan problems, compared with $800,000 in the second quarter of last year. The amount set aside is deducted from earnings.

That kind of reduction in expenses can't continue for much longer, Mr. McAveney said. Instead, "growth is the key here," he said. "We're continuing to expand our mortgage offices."

Signet Banking Corp. ... ... ... Ticker ... ... ... Yesterday's

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

... ... ... ... ... ... .. .. .. SBK ... .. ... ... 36 1/2 ... -4 3/8

Period ended

6/30/94 ... ... ... 2nd qtr. ... ... ... Year ago ... ... ... Chg.

Net Income .. .. .. $50,385 .. .. .. ... $40,440 .. .. .. ... +24.6%

Primary EPS ... ... $0.88 ... ... ... .. $0.71 ... ... .. ... +23.9%

Annualized return

on avg. assets ... 1.75% ... ... ... ... 1.38% ... ... ... .. --

Add. to allowance

for loan losses ... $2,999 ... ... .. .. $9,011 .. ... ... .. -66.7%

... ... ... ... ... 6 mos. ... ... .. .. Year ago ... ... ... Chg.

Net Income .. .. .. $103,498 ... ... ... $78,707 ... .. .. .. +31.5%

Primary EPS ... ... $1.81 ... ... .. ... $1.39 ... ... ... .. +30.2%

Annualized return

on avg. assets ... 1.81% ... ... ... ... 1.38% ... ... ... .. --

Add. to allowance

for loan losses ... $8,498 ... ... .. .. $24,509 ... ... ... -65.3%

Balances as of ... ... ... 6/30/94 ... ... ... 6/30/93

Assets ... ... ... ... ... $10,823,763 ... ... $12,044,138 ... -10.1%

Deposits ... ... .. .. ... $7,549,058 .. .. .. $7,827,717 ... -3.6%

Loans outst. .. .. ... ... $5,727,279 .. .. .. $5,823,540 ... -1.7%

Loan loss

reserve ... ... ... .. ... $245,764 ... ... ... $258,571 .. .. -5.0%

Figures in thousands (except per share data.)

Loyola Capital Corp. ... ... ... Ticker ... ... ... Yesterday's

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