Signet's earnings are flat at 2.7% Loan growth was weak, operating expenses high

July 19, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

Weak loan growth and higher operating expenses dampened Signet Banking Corp.'s second quarter, as earnings reached $30.5 million, up 2.7 percent from a year ago, the company said yesterday.

Signet earned 50 cents a share in the quarter that ended June 30 -- the same amount earned for the second quarter in 1995 -- and fell shy of the 53 cents a share estimated by most analysts.

David Stumpf, a banking analyst with A. G. Edwards & Sons Inc. in St. Louis, said some analysts are growing impatient with Signet's performance because earnings have been relatively flat for the past six quarters.

"The stock has gotten beaten up for good reason," Stumpf said. "But Signet is pretty confident they will see a turn in earnings, probably by the fourth quarter."

He said some analysts believe weaker earnings and a weaker stock price could make the Richmond-based company vulnerable to takeover.

"You've got to raise that issue," Stumpf said.

Signet's stock closed yesterday up 87.5 cents at $22.125.

Malcolm S. McDonald, Signet's president and chief executive, said slower growth in earnings was due in part to a decision by management to make fewer loans for fears that consumer loan delinquencies are rising.

"In April, we expressed concern over uncertainty about the economy and an apparent shift in consumer behavior," McDonald said in a written release. "As a precaution, we delayed some of our more aggressive marketing programs while we reassesed market conditions and calibrated our models."

Signet is evolving into a nationwide bank that conducts intensive research on consumer credit habits and markets banking products to individuals through the mail. The company has invested heavily in the strategy, and it plans to continue to pump millions into the effort.

Signet's expenses in the second quarter grew to $121.5 million, up 9 percent from the same time a year ago.

Its net interest margin fell to 4.75 percent in the quarter, down from 5.14 percent in the same quarter of 1995. The net interest margin is a ratio that shows how much a bank earns on loans and investments after interest payments to depositors and creditors.

Total loans edged upward by 4 percent to $5.9 billion in the second quarter, compared with year-ago figures. Loans to consumers slipped 4.7 percent to $2 billion in the quarter from the same period in 1995 and loans to businesses grew by $3.2 billion, up 13.8 percent.

Troubled assets fell 5.4 percent to $54.9 million in the quarter, compared with the prior year's results. But Signet said that it listed an $8.4 million real estate construction loan as troubled during the quarter.

Pub Date: 7/19/96

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