Cost cutting, increasing fee income drive Signet's earnings up 42 percent Bank is being acquired by First Union

Banking

October 17, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

Cost-cutting measures and increases in fee income lifted Signet Banking Corp.'s net income up 42 percent in the third quarter, the company said yesterday.

The Richmond, Va.-based banking company reported net income of $42.2 million, up from $29.6 million for the same period a year earlier.

Net income per share rose 39 percent to 68 cents a share, up from 49 cents in the year-ago quarter. "The ratios are excellent," said Joan T. Goodman, a banking analyst in Chicago with a unit of Donaldson, Lufkin & Jenrette Inc. "Everything looks good."

Despite a respectable showing, Signet's stock fell yesterday 43.8 cents a share to close at $55.438.

Signet's bottom line was boosted by a 14.8 percent increase in fee producing services, which include service charges on deposits, trust, and consumer loan servicing. Total non-interest income jumped to $78.2 million in the quarter, up from $68.1 million for the same period a year earlier.

As part of a company-wide restructuring, Signet slashed expenses by reducing full-time employees by 19.3 percent to 3,392, and part-time employees by 26.5 percent to 702.

Malcolm S. McDonald, Signet's chairman and chief executive, said the results are "indicative of very good credit quality, sound revenue growth and stringent cost management."

Last July, Signet agreed to sell out to Charlotte, N.C.-based First Union Corp. for about $3.3 billion. First Union expects to save millions through job cuts and office consolidation. The acquisition is expected to be completed by the end of the year.

Signet, which has $11.3 billion in assets, had 230 branches as of July 30 in Virginia, Washington, D.C. and Maryland. Eighty-four of its branches were in Maryland.

The company's net income was $73.2 million, or $1.19 per share, for the first nine months of the year, down 19.8 percent, from $91.3 million, or $1.51 per share, because of a restructuring charge. The charge, taken in the second quarter, totaled $58.7 million before taxes. Signet returned 1.48 percent on average assets, up 43.7 percent from the quarter a year earlier. Banks have generally aimed to return at least 1 percent. The ratio means that Signet earns $1.48 for every $100 in assets.

Pub Date: 10/17/97

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