No. 5 bank reports 30% jump in profits NationsBank's quarter comes in at $2 a share


July 16, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

NationsBank Corp., the bank sponsoring the 1996 Olympics, reported Olympian-type earnings in the second quarter, which vaulted 30 percent from a year ago.

NationsBank earned $605 million in the quarter ended June 30, or $2 a share, compared with earnings of $467 million, or $1.71 a share, for the corresponding period in 1995.

"It is very, very good growth," said Christopher Marinac, a banking analyst with Interstate/Johnson Lane Inc., an Atlanta-based brokerage firm. "This is not hocus-pocus. It is real growth."

NationsBank shares closed yesterday at $79.25, down $1.

The Charlotte, N.C.-based company, the fifth largest banking operation in the country with $192.3 billion in assets, has more than 62,000 employees and 1,948 banking branches in nine states, including Maryland.

The company earned $1.2 billion for the first six months of the year, or $3.95 a share, up 31 percent from $910 million, or $3.31 a share, as of June 30, 1995.

Earnings were boosted by several acquisitions and fees from selling loans into the secondary market. The jump in net income, however, was primarily driven by impressive gains in new loans and from products and services that generate fees.

Average loans jumped 15 percent to $124 billion in the quarter, up from the second quarter in 1995. Consumer loans were up 25 percent and business loans were up 7 percent.

"For these guys to pull off numbers like that, that's pretty darn good," said Alex Hart, a banking analyst with Ferris, Baker Watts Inc. "It just points out what you can do through sheer scale."

Hart said large banks are increasing loans at about 7 percent, while smaller banks are experiencing loan growth in the 15 percent range.

NationsBank's income from loans and other products grew to $1.6 billion, up 18 percent from the totals a year ago.

NationsBank also earned millions by charging consumers fees for servicing their mortgages and deposit accounts and for using ATMs. This so-called "noninterest income" grew 26 percent, to $917 million, in the quarter.

What impresses analysts is NationsBank's ability to continue wringing savings from operations. The company's efficiency ratio fell to 55.6 percent in the most recent quarter, down from 61.5 percent a year ago.

"That is a tremendous [earnings] driver" Hart said. "You are really beginning to see more of the benefits now that they have slowed down a little bit on the acquisition pace."

The lower the ratio the better, because it means that it costs NationsBank 55 cents to generate $1 in net interest income and other fee income.

Other key performance ratios sparkled. NationsBank's return on equity grew to 18 percent, up from 16.69 percent in June 1995.

Troubled loans fell to $854 million, down from $905 million. They represent 0.52 percent of total assets.

Pub Date: 7/16/96

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