Crestar posts record earnings as its loan picture brightens 77 cents a share exceeds 2nd-quarter estimates


July 10, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

Crestar Financial Corp. reported yesterday record net income of $87.4 million for the second quarter, driven by growing loans and fewer loan problems.

The Richmond-based banking company made 77 cents a share in the quarter that ended June 30, up 13 percent from the 68 cents a share it made in the second quarter last year. That beat Wall Street estimates by a penny.

The quarter was "very solid," said David West, a bank analyst at Richmond-based Davenport & Co. "They are showing good growth, good numbers, so I think they have good prospects."

In the first half of the year, Crestar's net income jumped 17 percent to $172.3 million, or $1.52 a share, compared with $147.6 million, or $1.32 a share, in the same period last year.

Crestar's shares closed yesterday at $58.9375, up 62.5 cents..

Crestar also said yesterday that it will sell about $600 million in credit card receivables, about half of its $1.1 billion credit card portfolio, to Boston-based Fleet Financial Group.

Crestar said it expects to make about $54 million on the deal. It agreed to the sale because the credit card borrowers are outside its main geographic market, Virginia, Maryland and Washington, said William V. Bunting, Crestar's group executive vice president for consumer finance.

Seventy-five employees will be affected by the sale, but all will be offered jobs within Crestar, the company said.

Davis said the sale was a good move because 85 percent of the loans written off in the quarter were credit card loans.

"This is a way of getting that issue behind them," he said.

Crestar is the largest independently owned bank in Virginia with $26.2 billion in assets, and 396 banking offices in Virginia, Maryland and Washington, 119 of them in Maryland.

Crestar achieved several key ratios that analysts use to judge the profitability of banks. It returned 1.39 percent on average assets, meaning that it earned $1.39 for every $100 in assets. The industry average is 1.26 percent

And it returned 16.46 percent on equity, that is, made 16.46 cents for every dollar invested in the company. The national average is 14.69 percent.

Although Crestar wrote off $18.6 million in credit card loans, overall write-offs in the first quarter fell to $21.8 million, 15 tTC percent less than in the same period last year. In addition, its provision for loan losses was down 39 percent to $21.8 million.

Davis said Crestar's loans grew faster than he expected. They jumped 15 percent in the quarter to $16.2 billion compared with the same period a year earlier.

"You don't see how they can get any better," he said. "They are gaining market share."

Pub Date: 7/10/98

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