Mercantile profit up 4.7% in quarter

Net income driven by trust business, expense controls

Banking

April 15, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

Mercantile Bankshares Corp.'s net income rose 4.7 percent in the first quarter, driven by its growing trust business and tight expense controls.

The company made $37.2 million in the first quarter that ended March 31, compared with $35.5 million in the corresponding period a year earlier. Net income per share jumped 8.2 percent in the quarter to 53 cents per share, compared with 49 cents in the 1998 period.

"Another solid quarter for the Merc," said John J. Rezai, a banking analyst at Blaylock & Partners LP.

Baltimore-based Mercantile, which is the state's largest independently owned banking company, met Wall Street expectations, according to 10 analysts surveyed by Zacks Investment Research.

"The nice thing about Mercantile is you know exactly what you will get quarter in, quarter out," said Harold R. Schroeder, a banking analyst at New York-based Keefe, Bruyette & Woods Inc.

"They just continue to perform. To some, consistency means value."

Shares of Mercantile closed yesterday at $35.875, up 37.5 cents.

Mercantile's earnings were driven in part by growth in its trust business, which made $15.1 million in the quarter, up 9.2 percent from the 1998 quarter, and income from service charges on deposit accounts, which surged 17.2 percent to $5.4 million.

Total assets were up 6.3 percent to $7.6 billion in the quarter, loans rose 8 percent to $5.2 billion, and deposits were up 4.7 percent to $5.9 billion.

Mercantile surpassed a couple of key benchmarks that the industry uses to measure performance. The company's return on average assets -- a ratio that gauges how profitably assets are used -- was 2.01 percent, which means the bank returned more than $2 for every $100 in assets. The average return for the industry is about 1.26 percent.

Mercantile's efficiency ratio, which measures the amount of money needed to generate $1 in revenue, was 47.94 percent. That means it costs Mercantile 47.94 cents to generate $1 in revenue. Most banks of similar size are typically in the upper-50s range.

"We had good expense control, and we had good asset growth," said David E. Borowy, head of investor relations at Mercantile. "It is the core banking here that is winning the day."

Total nonperforming loans, or loans which are late on principal or interest payments, fell 13.6 percent to $22.7 million, compared with $26.3 million for the same period a year earlier.

Schroeder said there is nothing flashy about Mercantile, but that it is simply a "strong and consistent" company.

Pub Date: 4/15/99

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