2 merging banks post record profits 1st Union, 1st Fidelity gained $1.48 billion

January 12, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

First Union Corp. and First Fidelity Bancorp. beat analysts' estimates yesterday as the newly merged companies reported record earnings of $1.48 billion for 1995, before merger-related restructuring charges.

Earnings were fueled by double-digit loan growth, hefty increases from fee-based products such as credit cards and mutual funds, merchant banking, and loan syndication services.

After merger-related restructuring charges of $73 million, or 26 cents a common share, the combined company earned $1.40 billion, or $5.04 a share for the year.

The company earned $5.30 a share before restructuring charges, beating analysts' estimates of $5.24 a share.

"We have entered 1996 with great momentum," said Edward E. Crutchfield, chairman and chief executive of the banking company, which has $131.9 billion in assets.

First Union, based in Charlotte, N.C., completed its merger with First Fidelity of Newark, N.J., on Jan. 2, creating the sixth-largest banking company in the nation. First Union operates 2,000 branches in 12 states, including Maryland, where it has 52 branches with $3.5 billion in deposits.

The company said restructuring charges related to the acquisition, which include severance contracts, will total $270 million. The bulk of the restructuring charges, or $197 million, will be charged in the first quarter of 1996.

Robert Atwood, First Union's chief financial officer, said yesterday that the company will continue to look for "fill-in" acquisitions in Baltimore and other new markets. He declined to give specifics, however.

Industry analysts were impressed with the results, especially with First Union's strong fourth quarter.

The company earned $404 million be-fore merger expenses in the quarter, up 20.6 percent from a year ago. Per-share earnings increased to $1.45, compared with $1.17 in 1994.

"The $1.45 was about 10 cents better than we thought they would do," said Tony Davis, a banking analyst with Dean Witter Reynolds Inc.

Revenues from products and services jumped 18 percent to $1.8 billion for the year.

The company's capital markets division, which provides loan syndication, debt-underwriting and risk-management services for clients, earned $243 million, up 62 percent from the prior year.

"The momentum is very strong going into '96," said Jerry Schmitt, managing director of First Union's capital markets group.

The company participated in 37 corporate debt-underwriting deals for clients last year, totaling $4.3 billion. It also executed one high-yield deal for a health care company and has four more scheduled for the first quarter.

First Union's loan syndication business was involved in 93 transactions last year that had a volume of $37.1 billion. In 1994, the company was the agent in only four deals vs. 58 for 1995.

Net loans jumped 16 percent to $90.6 billion, with credit cards and mortgage loans the biggest gainers. The company earned $4.7 billion from loans, up 2 percent from a year ago.

Consumer loans represent about 50 percent of the company's total loan portfolio. Mortgage loans and credit cards grew at about 8 percent in the fourth quarter, while commercial loans grew at 5 percent.

First Union had few credit problems, despite a nationwide increase in delinquent consumer loans. Total nonperforming assets were $826 million, or 0.91 percent of loans and foreclosed properties, compared with $887 million, or 1.14 percent a year ago.

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