Signet earns $3.5 million after charges

October 19, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Signet Banking Corp. said yesterday that its third-quarter operating profits jumped 25 percent, but $82.6 million in charges related to staff cuts and the expected spinoff of the Richmond, Va., company's credit card unit cut overall profit to only $3.5 million, or a nickel a share.

Shares of Signet, parent of Signet Bank/Maryland of Baltimore, showed little reaction since the restructuring charge had been previously announced. The company's stock closed at $34, up 12.5 cents on a day when the broader market posted a small loss.

"It didn't have any impact in the stock price," said Charles Mills, who follows Signet for Anderson & Strudwick, a Virginia stock brokerage firm. "The critical question is whether the credit card offering will be well received."

John Heffern, a regional bank analyst for NatWest Securities who is based in Baltimore, said Signet's core banking business has improved while its credit card operation's growth appears to be slowing down.

He said the credit card business is trying to recover from a change in marketing strategy that took the company away from offering lower fixed introductory rates in favor of higher variable rates.

The company is also having trouble retaining some customers who were lured last year by temporarily low "teaser" rates that are now being adjusted to market standards.

"It's not because they are giving up their credit card," Mr. Heffern said. "It's because someone else is giving them a low introductory rate. They're all just stealing each other's customers."

Signet Chairman Robert M. Freeman said the better core banking operating results resulted from a bigger spread

between the rates the bank charges for loans and what it pays for funds.

Other banks also have reported better interest margins as rates have risen this year, and like Signet have boosted the margin by putting more of their assets into high-rate categories like consumer loans.

The company also said it made a smaller provision for loan losses than in last year's third quarter, reflecting the bottoming out of the commercial real estate market.

"Independent of the special charges, the fundamentals of the company were very strong," Mr. Freeman said. But the company said it will have another $8 million to $10 million in fourth-quarter charges.

Signet Banking

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

Richmond, Va. ... ... ... Symbol ... ... ... ... Cls. ... ... Chg.

.. .. .. .. .. .. ... ... SBK ... .. ... ... ... 34 ... .. .. +

Period ended

09/30/94 .. .. .. ... ... 3rd qtr. ... ... .. .. Year ago ... ... Chg.

Net Income ... .. ... ... $3,462 .. .. .. .. ... $45,763 .. .. .. -92.4%

Primary EPS .. .. ... ... $0.05 ... .. .. .. ... $0.80 ... ... .. -93.8%

Annualized return

on assets .. .. .. .. ... 0.13 .. .. .. .. .. .. 1.51

Add. to allowance

for loan losses .. .. ... -- Not announced

.. .. .. .. .. .. .. 9 mos. .. .. .. .. .. .. Year ago .. .. .. .. Chg.

Net Income ... .. .. $106,960 ... .. .. .. .. $124,470 .. .. .. .. -14.1%

Primary EPS .. .. .. $1.88 .. ... .. .. .. .. $2.19 .. .. .. .. .. -15.1%

Annualized

return on assets ... 1.27 .. .. .. ... ... .. 1.43

Add. to allowance

for loan losses ... -- Not announced

Balances as of ... ... ... 9/30/94 ... ... ... 9/30/93 ... ... .. ...

Assets .. .. .. .. ... ... $11,045,233 ... ... $11,690,445 ... .. ... -5.5%

Deposits .. ... .. ... ... $7,851,080 .. .. .. $7,770,546 ... ... ... +1.5%

Loans outst. .. .. ... ... $6,511,080 .. .. .. $5,761,852 .. .. .. .. +13.0%

Loan loss

reserve .. .. .. .. .. ... 225,400 .. .. .. .. 254,706

Figures in thousands (except per share data)

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