Mercantile's earnings up 12% in fourth quarter

`It was another good quarter for them,' an analyst says

January 19, 2001|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

Mercantile Bankshares Corp., Maryland's largest independently owned banking company, reported yesterday that fourth-quarter profit rose 12 percent, to $45.7 million, as a result of growth in lending and its trust business.

Net income per diluted share in the three months that ended Dec. 31 rose 8.5 percent, to 64 cents, from the 59 cents reported for the fourth quarter of 1999.

For the entire year, Baltimore-based Mercantile earned $175.2 million, 11.1 percent more than its 1999 profit of $157.7 million. On a per-share basis, the company earned $2.51, up from $2.25 in 1999.

Fourth-quarter earnings per share met analysts' expectations, according to Zacks Investment Research. The bank's earnings per share for the entire year were a penny higher than analysts' expectations.

"It was another good quarter for them," said Gary Townsend, a banking analyst with Friedman, Billings, Ramsey & Co. in Arlington, Va. Townsend said Mercantile's earnings in the quarter might have been a little higher than analysts' predictions except that the bank accelerated some expenses that it could have postponed until this year.

The company's acquisitions of two banks last year, Union National Bank in Carroll County and the Bank of Fruitland in Salisbury, also appear to be going smoothly and helped the company strengthen its presence in those areas, Townsend said.

H. Furlong Baldwin, Mercantile's chairman and chief executive officer, credited the healthy quarter and year to continued strength in the company's core businesses.

"The loan growth on the books was very strong, and we had a nice increase in our wealth-management fees," he said. "The growth was across-the-board."

Total loans rose to $6.7 billion last year, 17.2 percent more than in the year before. Net interest income, what the bank earned on its investments and loans minus what it pays on deposits and borrowed funds, increased to $409.4 million last year, 10.9 percent more than in 1999.

Fee income from the trust division in the fourth quarter was $18.3 million, a 9.1 percent increase from the $16.8 million in the fourth quarter of 1999. For the year, fee income from the division rose 7.4 percent, to $69.9 million from $65 million in 1999.

Analysts use return on average assets ratio as one of the measures of a bank's overall profitability. Mercantile returned 2.11 percent on average assets in the year, up from 2.07 in 1999.

That means the bank made $2.11 for every $100 in assets. Mercantile outperformed the average for banks of similar size, which was 1.4 percent as of the third quarter, the latest figure available.

Despite the good results, Mercantile's stock dipped 75 cents yesterday, to $39.81.

"All financial stocks are down," said Christopher Mutascio, a bank analyst with Legg Mason Wood Walker Inc. in Baltimore.

Bank stocks rose earlier this month after the Federal Reserve cut interest rates but have been surrendering some of those gains as bank earnings are released, he said.

"It may be an indication of buy on the rumor and sell on the news," Mutascio said.

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