|
Biz Links Current Issue Q3-02 Index Q2-02 Index Q1-02 Index Q4-01 Index Q3-01 Index Q2-01 Index Q1-01 Index Prior Financial Services Updates Sept 2005 August 2005 July 2005 June 2005 May 2005 April 2005 March 2005 Feb 2005 Jan 2005 Dec 2004 Nov 2004 Oct 2004 Sept 2004 August 2004 July 2004 June 2004 May 2004 Feb 2004 Jan 2004 Dec 2003 Nov 2003 Oct 2003 |
Monthly Sector Summary During September, large-cap banks fell 2.74% to a loss of 8.75% year to date, from August's loss of 6.20% and yields rose 13 basis point to 3.84% from August's 3.71%. The ten year treasury ended the month at 4.33% [vs 4.02% on 8-31 - a rise of 31 basis points]. During August, large-cap banks fell 1.62% to a year to date loss of 6.20% from July's loss of 4.65% and yields rose 17 basis point to 3.71% from July's 3.54%. The ten year treasury ended the month at 4.02% [vs 4.28% on 7-29 - a fall of 26 basis points]. During July, large-cap banks rose 1.48% to a loss of 4.65% from June's loss of 5.96% and yields fell 4 basis point to 3.54% from June's 3.58%. The ten year treasury ended the month at 4.28% [vs 3.91% on 6-30 - a rise of 37 basis points]. During June, large-cap banks fell to a loss of 5.96% from May's loss of 5.59% and yields rose 1 basis point to 3.58% from May's 3.57%. The ten year treasury ended the month at 3.92% [vs 4.00% on 5-31 - a fall of 8 basis points]. The point spread of the ten year's yield over that of the sector was 49 basis points at September's end, 31 at August's end, 74 at July's end, 34 at June's end, 43 at May's end, 61 at Aprils end, and 89 at March's end. Based on that short history, the spread rose every time it fell below 40 and fell every month it was above 40. The ten year's yield has been bound in a range between 3.9% and 4.5%. The rising fed funds rate along with future expectations that those increases will continue SHOULD have raised the floor on the ten years yield to slightly greater than 4.0%. So the ten year may be at its mid-point in the new fed adjusted range. And bank stocks are near [or slightly below] mid-point in their point spread - making this a neutral time to accumulate stocks in this sector based on these two powerful metrics. Breaking Up Citigroup May Be Solution WSJ 10-15 Chuck Prince won't announce a break-up of Citigroup when he announces the bank's results on Monday. But maybe Citi's boss should. It makes a lot of sense. Breaking up Citi may sound like an extreme idea. But big problems demand bold solutions. And Citi has a big problem with its valuation. On a sum-of-the-parts basis, the group may be worth around $56 a share -- or some 20% more than the current market price. That's $50 billion of value -- about the size of US Bancorp, a large Minneapolis-based regional bank. This isn't a new problem. Citi's price-to-earnings rating has drifted down to about 10 from a premium of 18 when Sandy Weill merged Citicorp and Travelers. Citi blames the discount on a series of scandals in recent years -- from Enron and WorldCom to last year's bond trades that got it into trouble with European regulators when the trades created havoc in the market. Its solution is to clean up its act. That's what Mr. Prince's "five-point plan" is supposed to achieve. But the scandals are only a symptom of a bigger problem. Mr. Weill's bequest is too big and complex to manage. After all, Mr. Prince's plan looks to be working; the bank has avoided a big snafu for more than a year. But the rating hasn't recovered. That's because the plan is seen to be swaddling the group in bureaucratic red tape and stifling innovation. Put simply, cutting out the hiccups may also mean less growth. So why keep Citi together? There's no strong industrial reason. Few investors see much benefit in matching a retail brokerage with an investment bank, or either with consumer banking. True, there are funding advantages from colossal scale. But these are offset by complexity. Breaking up would hardly result in a tribe of pygmies. A carved-out consumer arm would be worth about $190 billion, wholesale and investment banking about $80 billion and the brokerage some $20 billion. So what's stopping Citi? Well, it's a huge step. Mr. Prince is a lawyer, so he's innately cautious. But people are beginning to talk about a break-up. And the longer he fails to close the discount, the louder the calls will get. Sleep Well With BB&T Stephen Simpson, CFA Motley Fool 10-14 I hope the folks at BB&T aren't offended that I keep labeling them "boring," because I truly mean it as a compliment. The management team understands what it's doing, knows the business, and doesn't try to grow at any cost. In fact, this bank has been through quite a lot. Based out of Winston-Salem, N.C., this company has seen major regional industries such as tobacco, textiles, and furniture get hammered. Yet the bank is still here and still growing -- helped along, no doubt, by industrial and population growth in the southeastern United States. For the third quarter, net income grew by around 7% as the company coupled strong non-interest income with solid mid-single-digit net interest income growth. Cost control is still very much in force, and the company's efficiency ratio improved over the previous quarter. Although the company's annualized return on assets dipped very slightly from the year-ago level, return on equity rose very slightly. Average loans outstanding grew by more than 7%, and the company saw continued solid performance in the commercial loan market. While loans outstanding continue to grow, credit quality is still excellent, and non-performing assets fell to 0.28%. I would think that this number will probably go up in the future or at least not improve much -- it's just hard for me to imagine how the quality numbers can get much better. Unlike many other banks, BB&T is actually growing its deposit base faster than its loan business. For the quarter, average deposits grew by just more than 8%. Nevertheless, the bank is getting pinched by the yield curve, and the net interest margin fell from 4.07% last year to 3.88% in this quarter. While members of management certainly acknowledged that a flatter or inverted yield curve would hurt the business, they don't see that as especially likely, and their projections call for a fairly stable margin in the immediate future. Management is actively looking for new acquisitions. Frankly, I think that's a good thing. Management would like to acquire more insurance agencies as well as community banks with less than $15 billion in assets. Fortunately for shareholders, history (and current commentary) suggests that the company won't overpay just for the sake of adding more assets and growth. With all that in mind, I'm still a fan of this boring old bank in North Carolina. Bank of America Likely to Come Back Sandler O'Neill & Partners Barrons 10-03 We are upgrading shares of Bank of America to Buy from Hold. Our 12-month price target of $48 and 2006 earnings estimate of $4.35 per share remain unchanged. However, the stock's 9% decline since mid-July has made the potential upside to our price target of 14% sufficiently attractive. We are increasing our third quarter 2005 earnings estimate by a penny, which primarily reflects the more favorable than originally anticipated capital markets environment during the quarter. Net interest income is expected to increase by $22 million (less than 1%) sequentially to $7.9 billion. Our assumed net interest income expansion is driven by growth in average earning assets, as we expect the net interest margin to contract by six basis points sequentially to 2.75%. Average earning assets are expected to increase by 2% sequentially to $1.14 trillion. We expect non-interest income, excluding securities gains, to decline by 2% sequentially to $6.4 billion. Trading revenues (excluding trading related net interest income) should increase 50% from the prior quarter's weakness to $428 million. However, this should be more than offset by declines in other revenues and equity investment gains. Specifically, we do not expect the $279 million in whole mortgage loan sale gains reported during the prior quarter to repeat. We expect private equity gains to total $295 million, down from $492 million in the prior quarter. Expense management should remain evident this quarter. We expect non-interest expenses to remain essentially flat at $6.9 billion. We expect the efficiency ratio (non-interest expense divided by total revenue less interest expense) to increase by five basis points sequentially to a still impressive 49.1%. We expect enhanced disclosures about trading related net interest income in the wake of last quarter's surprising 30 basis point net interest margin contraction. More details and disclosures about the proposed acquisition of MBNA as well as Bank of America's overall credit card business will likely be a fourth quarter 2005 event. The MBNA acquisition is expected to close on January 1st, 2006. Wachovia, Wells Fargo, USB Earnings Outlook Lisa Sanders, MarketWatch 10-13 Analysts at Lehman Brothers predicted Wachovia Corp. and Wells Fargo would report the strongest revenue growth among the so-called super-regional banks and U.S. Bancorp would benefit from a surge in spending among its government clients when the three report quarterly results next week. "Generally speaking, we expect the majority of the companies under coverage to meet third-quarter earnings expectations, although revenue growth would likely remain sluggish," analyst Jason Goldberg said in a note to clients. Wachovia, which is scheduled to report Monday, is expected to earn $1.08 a share according to a Thomson First Call poll, an 8% increase from the year-ago period. Lehman sees Wachovia reporting a per-share profit one cent ahead of the average estimate of analysts. "We see several positive factors in Wachovia bank's favor in the second half," Goldberg said. "A fairly stable margin, accelerating share repurchase, a return to more 'normal' trading results, and further cost saves from SouthTrust and its efficiency initiative." Analysts are looking for Wells Fargo on Tuesday to report earnings of $1.15 a share, up 13% from a year ago. Lehman expects the bank to earn a cent less than the average. "While we believe the company has the capacity to report a higher figure, it tends to use the strong current results to invest in long-term growth opportunities," Goldberg said. "Note, WFC has reported below consensus in each of the past five quarters." As for USB, which also reports Tuesday, analysts expect a 9% gain in per-share earnings to 61 cents. The bank's "government-related processing businesses (should) benefit from a surge in spending in September, given that is the last month of the government's fiscal year and employees scramble to spend their full budgets," Goldberg said. Goldberg said he would be looking for an update on the margin outlook, which he said was "key for near-term performance." Bank One-J.P. Morgan Chase Merger Perfomance in Houston Matt Stichnoth, BankStocks.com 10-07 If you asked me back in 2004 when the Bank One-J.P. Morgan Chase merger was announced whether Chase would shut overlapping Chase and Bank One branches in the Houston market, I'd have said, "Are you kidding? Of course!" Guess what? I'd have been wrong. From today's Houston Chronicle: Almost a year and a half [after the deal closed], as Bank One signs are replaced by the Chase moniker, the combined operation is left with about the same number of jobs and more branches in the Houston area. "We're really doubling our presence. This wasn't about consolidation. It was about growth," said Bryan McVeigh, senior vice president for the Southeast Texas Market. "As a matter of fact, we're opening four more branches in Houston this year and 10 to 12 next year." . . . "There are branches right across the street from each other doing well, and we're going to leave them open," said Phil Conway, president of the Houston region for Chase. "In some places the volume is so big you couldn't consolidate if you want to." And so another misguided banking M&A practice bites the dust. Here's another prediction of mine that almost certainly will come true: post-consolidation customer attrition for the combined company in Houston will be on the low side. . . Bank of America Reports EPS of $1.02 vs. $0.91 in Q3-04 PRNewswire 10-19 Bank of America Corp. reported that Q3 net income rose 10% to $4.13 billion from $3.76 billion a year earlier. Per share earnings increased 12% to $1.02 per share (diluted) from $0.91 per share. Return on average common equity in Q3 was 16.33%. Excluding merger and restructuring charges of $120 million pre-tax, equal to 2 cents per share, the company earned $1.04 per share. Improved results were driven by a 16% increase in revenue, reflecting continued success in growth initiatives in all of BAC's major business segments. Revenue growth was driven primarily by increases in noninterest income, including continued strength in card results, service fees, a rebound in mortgage banking income, improved trading account profits and higher equity investment gains. Net interest income on a fully taxable-equivalent basis was $7.97 billion, up almost 2% from $7.84 billion a year earlier, as the impact of continued success in growing loans and deposits was dampened by continued relatively low long-term interest rates and a flatter yield curve. Specifically, the increase in net interest income was driven by growth in consumer and middle-market business loans, higher domestic deposit levels, and a larger asset-liability management portfolio. These increases were partially offset by margin compression resulting from a flattening yield curve and a lower trading-related net interest income contribution. Net interest income was up almost 2% from Q2-05. The net interest yield in Q3 was 2.80%, down 1 basis point from Q2 and 50 basis points from Q3-04. Noninterest income rose 39% to $6.83 billion from $4.92 billion a year earlier. These results were driven by higher card income, equity investment gains and trading account profits. Mortgage banking income rebounded from a $250 million loss the previous year related to writedowns associated with mortgage servicing rights. With strong revenue growth and continued expense control, the efficiency ratio for Q3-05, including merger and restructuring charges, improved to 49.20% (48.39% excluding merger and restructuring charges). Noninterest expense increased 4% to $7.29 billion compared to $7.02 billion a year ago, due primarily to increases in revenue-related incentive compensation resulting from improved performance. Full year 2005 cost savings from the merger with FleetBoston Financial Corporation are estimated to be $1.85 billion. Net charge-offs were $1.15 billion, or 0.84% of average loans and leases. This compared to $880 million, or 0.68%, in Q2-05 and $719 million, or 0.57 percent of average loans and leases, in the third quarter of 2004. Nonperforming assets decreased to $1.60 billion, or 0.29 percent of total loans, leases and foreclosed properties, at September 30, 2005. This compared to $1.90 billion, or 0.36 percent, at June 30, 2005 and $2.84 billion, or 0.55 percent, at September 30, 2004. During the quarter, Bank of America paid a cash dividend of $0.50 per share. The company also issued 7.0 million shares, primarily related to employee stock options and ownership plans, and repurchased 10.6 million shares. Period-ending common shares issued and outstanding were 4.01 billion in Q3, compared to 4.02 billion in Q2-05 and 4.05 billion in Q3-04. BB&T announces record net income of $442.0 million; EPS total $.80 PRNewswire 10-14 BB&T reported today Q3 net income totaling $442.0 million, or $.80 per diluted share. Net income increased 7.1% compared with $412.9 million earned in Q3-04. Diluted earnings per share for the quarter increased 8.1% compared to $.74 earned during Q3-04. BB&T's Q3 net income produced annualized returns on average assets and average shareholders' equity of 1.65% and 15.69%, respectively, compared to prior year returns of 1.69% and 15.42%, respectively. BB&T's noninterest income generating businesses produced solid growth rates during Q3-05 compared to 2004. Total noninterest income was $605.1 million for the current quarter, an increase of 13.6% compared with the same period in 2004. The increase includes higher revenues from insurance operations, mortgage banking operations, service charges on deposit accounts, trust services, investment banking and brokerage fees and commissions and other nondeposit fees and commissions. BB&T's asset quality remained excellent during Q3-05. Nonperforming assets, as a percentage of total assets, decreased to .28% at 9-30 compared to .29% at June 30 and .40% at 9-30-04. Annualized net charge-offs were .30% of average loans and leases for Q3-05, up from .25% in Q2-05, but down from .34% in Q3-04. Return on average assets was 1.64% in Q3-05 vs. 1.68% in Q3-04. Return on average equity was 15.65% in Q3-05 vs. 15.35% in Q3-04. Net yield on earning assets (taxable equivalent) was 3.88% in Q3-05 vs. 4.07% in Q3-04. The Efficiency ratio (taxable equivalent) was 51.7% in Q3-05 vs. 50.3% in Q3-04. Bank of New York Reports Q3 EPS of 51 Cents, up 11% BusinessWire 10-20 The Bank of New York reported Q3 net income of $389 million and diluted earnings per share of 51 cents, compared with net income of $354 million and diluted earnings per share of 46 cents in Q3-04, and net income of $398 million and diluted earnings per share of 52 cents in Q2-05. Year-to-date net income was $1,166 million, or $1.51 of diluted earnings per share, compared to $1,089 million, or $1.40 of diluted earnings per share in 2004. Return on Average Common Shareholders' Equity was 16.15% in Q3-05 vs. 17.12% in Q2-05 and 15.90% in Q3-04. Return on Average Assets was 1.53% in Q3-05 vs. 1.59% om Q2-05 and 1.45% in Q2-04. The Efficiency Ratio was 65.5% in Q3-05 vs. 65.7% in Q2-05 and 65.2% in Q3-04. Securities servicing fee growth over the year-ago period reflects solid growth across all business segments. On a sequential-quarter basis, fees were up 4%. Execution and clearing fees were up considerably from 2004, reflecting good organic growth at Pershing and in the execution businesses, as well as the additional revenues from the LJR acquisition. Investor services fees rose significantly from the year-ago quarter due to strong performance across all business lines, which include global fund services, global custody, securities lending, global liquidity services and outsourcing. Issuer services fees increased substantially versus the year-ago quarter due to an increase in trading volumes and corporate actions in depositary receipts, as well as continued strength in international issuance and structured products in corporate trust. Broker-dealer services fees improved versus the year-ago period as a result of increased collateral management activity and higher volumes in government securities clearance. Sequential performance was marginally lower, as higher fees from collateral management were offset by lower volumes in government securities clearance. Citigroup Q3-05 Net Income of $7.143 Billion vs $5.308 Billion in Q3-04 AP & BusinessWire 10-17 Citigroup today reported net income for the third quarter of 2005 of $7.14 billion, or $1.38 per share. Return on common equity was 25.4%. Net income includes a $2.12 billion after-tax gain on the sale of life insurance and annuities, which closed in the third quarter. Income from continuing operations [which excludes the sale of Travelers Life & Annuity to MetLife] was $4.99 billion, or $0.97 per share, up from 96 cents a year earlier. For the first nine months of the year, Citigroup reported net income of $17.66 billion, or $3.39 a share, up from $11.73 billion, or $2.24 per share, in 2004. Net income from continuing operations was $14.8 billion, or $2.85 a share, up from $10.9 billion, or $2.09 a share. Revenue increased 15% to nearly $21.5 billion in the third quarter from $18.74 billion a year earlier. Analysts surveyed by Thomson Financial had expected Citigroup to earn 99 cents per share on revenue of $20.47 billion. Fifth Third Bancorp Reports Q3-05 EPS of $0.71 vs. $0.81 in Q3-04 PR Newswire 10-20 Fifth Third Bancorp's Q3-05 earnings per diluted share were $.71 compared to $.83 per diluted share for the same period in 2004. Third quarter net income totaled $395 million compared to $471 million in the same quarter last year. Return on average assets and return on average equity were 1.51% and 16.6%, respectively, compared to 1.95% and 21.1% in Q3-04. Third quarter earnings and balance sheet comparisons to the prior year are impacted by the previously disclosed first quarter 2005 acquisition of First National Bankshares of Florida). Q3-04 earnings were positively impacted by a $27 million decrease in the reserve for credit losses and the corresponding decrease in the provision for loan and lease losses. Revenue and net income trends remain below our expectations," stated George A. Schaefer, Jr., President and CEO of Fifth Third Bancorp. "Deposit growth year to date has not been sufficient to fund loan growth or to prevent further contraction in the net interest margin. This factor mitigated very strong lending results, well behaved credit trends and excellent results from Fifth Third Processing Solutions and our commercial line of business. To improve results, we have aggressively increased deposit rates, despite the negative impact on the third quarter margin, to deliver greater value to new and existing customers. We believe competitive rates combined with enhanced product offerings, like our new identity theft solution, will result in better deposit performance than we have seen through the first nine months of this year. Our goal remains improving our funding mix to more effectively fund future loan growth. Net interest income on a fully taxable equivalent basis decreased three percent over the same quarter last year and seven percent on an annualized basis from last quarter. Third quarter margin compression largely resulted from aggressive increases in deposit pricing combined with lower than expected growth in balances. Fifth Third remains optimistic that core deposit trends will improve in the fourth quarter from year-to-date 2005 run rates and that recent aggressive pricing and marketing initiatives will improve the funding mix, more effectively fund future loan growth and improve net interest margin trends. Net interest income was $745 million in Q3-05 vs. $758 million in Q2-05 and $766 million in Q3-04. Noninterest income 622 million in Q3-05 vs. 635 million in Q2-05 and $611 million in Q3-04. Dividend payout ratio was 53.5% in Q3-05 vs. 46.7% in Q2-05 and 38.6% in Q3-04. Efficiency Ratio was 53.5% in Q3-05 vs. 52.2% in Q2-05 and 47.0% in Q3-04. Net interest margin was 3.16% in Q3-05 vs. 3.29% in Q2-05 and 3.42% in Q3-04. Credit quality metrics and trends remained stable at historically low levels in the third quarter. Net charge-offs as a percentage of average loans and leases were 38 bp in the third quarter, compared to 34 bp last quarter and 40 bp in the third quarter of 2004. Nonperforming assets were 51 bp of total loans and leases and other real estate owned at September 30, 2005, compared to 51 bp last quarter and 48 bp posted in the year ago third quarter. Compared to Q3-04, net interest income on a fully taxable equivalent basis decreased three percent despite five percent growth in average earning assets due to a 26 basis point decline in the net interest margin. Margin, net interest income and earning asset trends and comparisons to prior year periods are impacted by the first quarter 2005 acquisition of First National, including a modestly negative impact to net interest income from purchase accounting loan and deposit net amortization, common stock repurchase activity and the impact of sales and cash flows in the reduction of the available-for-sale securities portfolio. In September, Fifth Third's Board of Directors increased the quarterly cash dividend on its common shares to $.38 per share, an increase of 19% over the $.32 per share declared in September 2004 and a 9% increase over the $.35 per share declared in June 2005. Fifth Third repurchased 2.3 million common shares in the third quarter of 2005. As of September 30, 2005, the remaining authority under the plan authorized by the Board of Directors in January of 2005 is 17.8 million shares. JPMorgan Chase Reports Q3-05 Net Income of $.71 vs. $.39 for Q3-04 Businesswire 10-19 JPMorgan Chase reported Q3-05 net income of $2.5 billion, or $0.71 per share, compared with net income of $1.4 billion, or $0.39 per share, for the third quarter of 2004. Current period results include $221 million (pre-tax) of merger charges, or $0.04 per share, reflecting the merger with Bank One Corporation completed on July 1, 2004. Excluding these charges, operating earnings were $2.7 billion, or $0.75 per share. Prior-year reported results included $752 million (pre-tax) of merger charges and $451 million (pre-tax) to conform accounting policies, or $0.21 per share. Excluding these charges, operating earnings were $2.2 billion, or $0.60 per share. Refer to the "Merger and other financial information" section of this press release for additional information concerning the merger. Return on Common Equity was 9% in Q3-05, 4% in Q2-05 and 5% in Q3-04. Return on Assets was 0.84% in Q3-05, 0.34% in Q2-05 and 0.50% in Q3-04. In the investment bank segment: Operating earnings of $1.1 billion were strong, up $436 million, or 70%, from the prior year and 75% from the prior quarter. The increases were driven primarily by record trading revenues of $2.4 billion, up $1.6 billion from the prior year and $1.8 billion from the prior quarter. In the retail financial services segment: Operating earnings of $656 million were down $166 million, or 20%, from the prior year. Results reflected a special provision for credit losses of $250 million attributable to Hurricane Katrina. Excluding the impact of the special provision, operating earnings would have been $811 million, down $11 million, or 1%. In the card services segment: Operating earnings of $541 million were up $120 million, or 29%, from the prior year. Results reflected a special provision for credit losses of $100 million attributable to Hurricane Katrina. Excluding the impact of the special provision, operating earnings would have been $603 million, up $182 million, or 43%. In the treasuries and securities services segment: Operating earnings were $263 million, up $167 million from the prior year. Earnings benefited from higher revenues, due to wider spreads on liability balances, business growth, and increased liability balances, and lower expenses. In the asset and wealth services segment: Operating earnings were a record $315 million, up $118 million, or 60%, from the prior year. Performance was driven by increased revenues, partially offset by higher compensation expense. KeyCorp Reports Q3-05 NOI of $0.67 vs. $0.61 in Q3-04 PR Newswire 10-20 KeyCorp announced Q3 net income of $278 million, or $0.67 per diluted common share, compared with $252 million, or $0.61 per share, for the third quarter of 2004. For Q2-05, net income was $291 million, or $0.70 per diluted common share. For the first nine months of 2005, net income was $833 million, or $2.01 per diluted common share, compared with $741 million, or $1.78 per share, for the first nine months of 2004. Return on average total assets was 1.22% in Q3-05 vs. 1.30% in Q2-05 and 1.16% in Q3-04. Return on average equity was 14.84% in Q3-05 vs. 16.15% in Q2-05 and 14.62% in Q3-04. "Key's third quarter performance reflects the company's ability to produce solid financial results in a more challenging interest rate environment," said Chairman and Chief Executive Officer Henry Meyer III. "Taxable-equivalent revenue, which increased $102 million from the year-ago period, benefited from growth in net interest income and a stronger performance from our fee-based businesses. The increase in net interest income was driven by a 7 basis point improvement in the net interest margin to 3.67%, higher earning assets resulting from solid commercial loan growth, and an increase in core deposits. The improvement in fee income was due primarily to increases in loan fees, and income from principal investing and capital markets activities." Taxable-equivalent net interest income increased to $726 million for Q3-05 from $673 million for the same period last year. Average earning assets rose by 6%, due primarily to commercial loan growth, while the net interest margin increased 7 basis points to 3.67%. Compared with Q2-05, taxable-equivalent net interest income grew by $3 million. This growth was attributable to a $740 million increase in average earning assets, which more than offset the effect of a 4 basis point decline in the net interest margin. During Q2-05, Key's net interest margin benefited from a principal investing distribution of $15 million received in the form of dividends and interest. This distribution added approximately 8 basis points to the second quarter margin. Key's noninterest income was $531 million for Q3-05, compared with $482 million for Q3-04. Increases of $34 million in income from principal investing and capital markets activities, and $8 million from letter of credit and loan fees drove the improvement. Key's provision for loan losses was $43 million for Q3-05, compared with $51 million for the year-ago quarter and $20 million for Q2-05. Net loan charge-offs for the quarter totaled $49 million, or 0.30% of average loans, compared with $76 million, or 0.49%, for the same period last year and $48 million, or 0.30%, for Q2-05. National City Reports Q3-05 Net Income of $.74 per diluted share vs. $.86 for Q3-04 PRNewswire 10-18 National City Corporation reported Q3-05 net income of $478 million, or $.74 per diluted share, compared with $591 million, or $ .86 per diluted share, for Q3-04. Returns on average common equity and assets for the three months ended 9-30-05 were 14.6% and 1.3%, respectively. For the nine months ended September 30, 2005, net income was $1.6 billion, or $2.45 per diluted share, compared with $1.8 billion, or $2.85 per diluted share in the same period in 2004. Mortgage and First Franklin earnings were down sharply, as expected, reflecting the particular competitive pressures at this point in the mortgage cycle. The decline in these two units accounted for more than 100% of the total decline in Q3 earnings compared to either the prior quarter or year-ago quarter. Return on average common equity was 14.59% in Q3, 19.65% in Q2, 15.35% in Q1 and 19.0% in Q3-04. Return on average total equity was 14.61% in Q3, 19.66% in Q2, 15.37% in Q1 and 19.01% in Q3-04. Return on average assets was 1.31% in Q3, 1.80% in Q2, 1.42% in Q1 and 1.76% in Q3-04. Net interest margin was 3.83% in Q3, 3.85% in Q2, 3.85% in Q1 and 4.04% in Q3-04. Efficiency ratio was 59.25 in Q3, 55.06% in Q2, 59.16% in Q1 and 55.54% in Q3-04. Tax-equivalent net interest income was $1.2 billion for the third quarter of 2005, up 4% from the preceding quarter and the comparable period in the prior year. Net interest margin was 3.83% in Q3-05, compared to 3.85% in Q2-05, and 4.04% in Q3-04. Average portfolio loans for the third quarter of 2005 increased 3% compared with the second quarter of 2005. Compared with the third quarter of the prior year, average portfolio loans were up 14% due primarily to strong home equity and commercial lending. Fees and other income for Q3-05 were $716 million, compared with $951 million in Q2-05 and $1.0 billion in Q3-04. Deposit service charges grew 12% on both a linked- quarter and year-over-year comparison. Fees and other income for the third quarter of 2005 included a previously disclosed $16 million gain on the sale of Madison Bank & Trust. For the third quarter of 2005, these increases were more than offset by lower mortgage banking revenue resulting from lower margins on loan sales and lower hedging gains. The sale of National City's former subsidiary, National Processing, in October 2004 also contributed to lower levels of fee income in Q3-05. Payment processing revenue associated with National Processing was $132 million in Q3-04. The provision for credit losses for the third quarter of 2005 was $56 million compared with $26 million in the second quarter of 2005 and $98 million in the third quarter of the prior year. Net charge-offs for the third quarter of 2005 were $83 million, compared with $72 million in the second quarter of 2005 and $97 million in the third quarter of last year. For the three-month periods ending September 30, 2005, June 30, 2005, and September 30, 2004, annualized net charge-offs as a percentage of average portfolio loans were .30%, .27%, and .41%, respectively. Overall, commercial and consumer credit quality remains strong. Nonperforming assets were $585 million at September 30, 2005, compared to $572 million at June 30, 2005 and $628 million at September 30, 2004. Nonperforming assets as a percentage of period-end portfolio loans and other nonperforming assets were .54%, .54%, and .64% for these same periods. The allowance for loan losses was $1.1 billion, or 1.02% of portfolio loans at September 30, 2005. North Fork Reports Q3-05 Net Income of $.50 per diluted share vs. $.47 for Q3-04 PRNewswire 10-18 North Fork Bancorporation reported increases in earnings, and earnings per share, loan growth, asset quality improvements, a stabilized net interest margin and continued repositioning of its balance sheet. Highlights in the current period include: [1] 98% increase in earnings for the third quarter compared to 2004, with a 6% increase in diluted earnings per share. [2] Returns on average tangible equity and tangible assets of 29.43% and 1.83%, respectively. [3] A stabilized net interest margin at 3.52% with only a 7 basis point decline from the previous quarter. [4] 26% annualized growth in commercial loans. [5] 25% decline in non-performing assets. [6] $1.8 billion reduction in borrowings as the balance sheet repositioning continued. [7] An increase in the Company's common share repurchase program to 16 million shares. Net income for the quarter ended September 30, 2005 was $237 million or $.50 diluted earnings per share compared to $120 million or diluted earnings per share of $.47 for the comparable period in 2004. The Company's returns on average tangible equity and assets in the current quarter were 29.43% and 1.83%, respectively. For the quarter ended September 30, 2005, net interest income and net interest margin were $434.6 million and 3.52%, respectively, compared to $259.5 million and 4.23% in 2004. On a linked quarter basis, the net interest margin declined by a modest 7 basis points. The net interest income decline, linked quarter, was due to the balance sheet repositioning program that reduced average interest earning assets by approximately $2.7 billion and the rising cost of funds as the yield curve remained flat. The Company continued to reposition its balance sheet in the current environment. It utilized cash flows from securities and 1-4 residential loans to reduce borrowings by $1.8 billion and brokered deposits by approximately $700 million. The Company advised that it expects that the net interest margin will remain substantially unchanged for the remainder of the year. Non-performing assets declined, linked quarter, by approximately $35 million or 25%. Net charge-offs in the quarter were 8 basis points. The overall allowance for loan losses to non-performing loans improved to 338%. The allowance for loan losses of $220 million, when allocated between residential mortgages and all other commercial loans, was .37% and 1.17%, respectively. Return on Average Total Assets was 1.60% in Q3-05 and 1.75% in Q3-04. Return on Average Tangible Assets was 1.83% in Q3-05 and 1.85% in Q3-04. Return on Average Equity was 10.13% in Q3-05 and 19.66% in Q3-04. Efficiency Ratio was 39.15% in Q3-05 and 37.62% in Q3-04. Net Interest Margin was 3.52% in Q3-05 and 4.23% in Q3-04. PNC Third Quarter Earnings Rise 29% PrNewswire 10-20 The PNC Financial Services reported Q3-05 earnings of $334 million, or $1.14 per diluted share. Earnings a year ago were $258 million, or $0.91 per diluted share, and earnings for the second quarter of 2005 were $282 million, or $0.98 per diluted share. Earnings for the third quarter of 2005 include after-tax implementation costs of $29 million related to the company's One PNC initiative, or $0.10 per diluted share. For the first nine months of 2005, the company earned $970 million, or $3.35 per diluted share, compared with $890 million, or $3.13 per diluted share, for the first nine months of 2004. Return on average common equity was 16.13% for the quarter compared with 14.42% a year ago and 14.34% in Q2-05. Return on Average assets was 1.45% in Q3-05 vs. 1.29% in Q2-05 and 1.36% in Q3-04. Net interest margin was 2.96% in Q3-05 vs. 3.00% in Q2-05 and 3.19% in Q3-04. The Efficiency ratio was 69% in Q3-05 vs. 71% in Q2-05 and 74% in Q3-04. Taxable-equivalent net interest income totaled $566 million for the quarter compared with $498 million a year ago and $541 million in the second quarter of 2005. The increases over both prior periods resulted from higher income associated with increased interest-earning assets partially offset by higher costs of deposits. The net interest margin in the third quarter was 2.96 percent compared with 3.19 percent a year ago and 3.00 percent last quarter. The net interest margin decreased compared with the prior quarter due to narrower interest rate spreads. These factors were partially offset by a higher contribution from noninterest-bearing funding sources and higher yields on securities. Noninterest income totaled $1.113 billion for the third quarter compared with $838 million a year ago and $925 million last quarter. The 20 percent increase compared with the sequential quarter resulted primarily from higher trading revenues, higher equity management gains, higher asset management fees, increased banking fees, higher gains on sales of education loans and lower net securities losses. In addition, the third quarter of 2005 included a $16 million gain related to a contribution of BlackRock stock to the PNC Foundation. The increase compared with a year ago resulted from higher fund servicing and consumer-related fees, as well as higher trading revenues, higher equity management gains and increased asset management fees. Overall asset quality remained strong due to the company's continued focus on lending that meets prudent risk-reward parameters. The provision for credit losses for the quarter was $16 million compared with $13 million a year ago and a credit of $27 million for the sequential quarter. The increase in the provision compared with the year-earlier period was attributable to loan growth, while the increase over the second quarter of 2005 was primarily attributable to a $53 million loan recovery in Q2-05. Net charge-offs were $15 million for the quarter compared with $13 million a year ago and net recoveries of $38 million last quarter. The net recoveries in the second quarter of 2005 were driven by the single, large loan recovery referred to above. Regions EPS 55 cents [61 proforma] vs. 55 cents in Q3-04 Businesswire 10-14 Regions Financial announced earnings of 55 cents per diluted share or 61 cents excluding 6 cents in merger and other charges, up 3.4 percent linked quarter. For Q3-04, Regions earned $256.7 million, or 55 cents per diluted share, including 2 cents of merger-related costs. Return on average stockholders' equity was 9.31% in Q3-05 vs 12.08% in Q3-04. Return on average total assets was 1.17% in Q3-05 and 1.28% in Q3-04. Credit quality remained excellent in the third quarter with continued low levels of net loan charge-offs and declining non-performing assets. Net loan charge-offs for the Q3 were $37 million, or an annualized 0.25% of average loans, compared to Q2's annualized 0.23%. Non-performing assets declined to $440.5 million (0.75% of loans and other real estate) as of 9-30-05, compared to $455.8 million as of 6-30-05. Regions recorded a Q3 provision for loan losses of $62.5 million, resulting in a loan loss allowance of $784 million or 1.34% of total loans. The provisioning level is inclusive of management's consideration of estimates of hurricane-related losses based on information available at quarter end, existing reserves related to loans in hardest hit areas, and current trends in non-performing assets and net charge-offs, among other factors. SunTrust Banks Reported Net Income of $1.42 per share - Up from $1.30 in Q3-04 PRNewswire 10-18 SunTrust Banks reported net income for Q3-05 of $510.8 million, as compared to $368.8 million generated during Q3-04. Net income per diluted share was $1.40, up 8% from Q3-04. Operating net income per diluted share was $1.42, up 9% from Q3-04. Operating net income does not include $7.5 million of after- tax merger charges incurred in the third quarter of 2005 associated with SunTrust's acquisition of National Commerce Financial Corporation (NCF), which closed on October 1, 2004. Return on average total assets was 1.19% in Q3-05, 1.13% in Q2 and 1.24% in Q1. Return on average total shareholders' equity 12.05% in Q3-05, 11.48% in q2 and 12.39% in Q1. The Efficiency ratio was 58.62% in Q3-05 vs. 61.12% in Q3-04. Fully taxable net interest income was $1,175.7 million in Q3-05, up from $893.7 million in Q3-04. Fully taxable net interest income was up 8% from the third quarter of 2004 on an estimated historical combined basis. The primary factor driving the net interest income growth year-over-year has been strong loan growth. Loans have grown 13% on average from the third quarter of 2004 on an estimated historical combined basis. The net interest margin of 3.12% for Q3-05 was down four basis points from Q2-05 primarily due to an increase in loans held for sale at a compressed margin. Loans held for sale increased by $1.8 billion on average, or 26%, in Q3 from Q2-05. Although net interest margin declined in Q3-05, fully taxable net interest income increased $33.3 million, or 12%, in Q3 compared to Q2-05 on a sequential annualized basis. Total noninterest income was $832.4 million for Q3-05, up from $627.7 million for Q3-04. Total noninterest income for the third quarter was up 12% from the third quarter of 2004 on an estimated historical combined basis. Net charge-offs in Q3-05 were 0.27% of average loans, up from 0.13% of average loans in Q2-05 and 0.24% of average loans in the third quarter of 2004. Net charge-offs were $76.7 million in Q3-05 compared to $35.4 million in Q2-05. The allowance for loan and lease losses decreased to $1,029.9 million at September 30, 2005 from $1,036.2 million at June 30, 2005. The allowance declined by $6.3 million due in part to the effect of the Delta Airlines charge-off. Excluding the effect of the Delta Airlines charge-off, the allowance for loan and lease losses would have increased by $11.1 million as a result of the Company's continued strong loan growth. U.S. Bancorp Reports Record Net Income BusinessWire 10-20 U.S. Bancorp reported net income of $1,154 million for Q3-05, compared with $1,066 million for Q3-04. Net income of $.62 per diluted share in Q3-05 was higher than Q3-04 by $.06 (10.7%). Return on average assets and return on average equity were 2.23% and 22.8%, respectively, for Q3-05, compared with returns of 2.21% and 21.9%, respectively, for Q3-04. Third quarter net interest income on a taxable-equivalent basis was $1,791 million, compared with $1,782 million recorded inQ3-04. Average earning assets for the period increased over Q3-04 by $12.3 billion (7.3%), primarily driven by a $4.2 billion (28.6%) increase in residential mortgages, a $3.9 billion (10.0 percent) increase in total commercial loans and a $3.3 billion (7.8%) increase in total retail loans. The positive impact to net interest income from the growth in earning assets was offset somewhat by a lower net interest margin. The net interest margin in Q3-05 was 3.95%, compared with 4.22% in Q3-04. The decline in the net interest margin reflected the current lending environment, asset/liability management decisions and the impact of changes in the yield curve from a year ago. Since Q3-04, credit spreads have tightened by approximately 19 basis points across most lending products due to competitive pricing, growth in corporate payment card balances and a change in mix due to growth in lower-spread, fixed-rate credit products. The net interest margin also declined due to funding incremental growth with higher cost wholesale funding and asset/liability decisions designed to minimize the Company's rate sensitivity position, including a 55% reduction in the net receive fixed swap position since September 30, 2004. Increases in the margin benefit of deposits and net free funds helped to partially offset these factors. Average noninterest-bearing deposits for the third quarter of 2005 were lower than the third quarter of 2004 by $357 million (1.2%). The year-over-year change in the average balance of noninterest-bearing deposits was impacted by product changes in the Consumer Banking business line. In late 2004, the Company migrated approximately $1.3 billion of noninterest-bearing deposit balances to interest checking accounts as an enhancement to its Silver Elite Checking product. Third quarter noninterest income was $1,576 million, an increase of $52 million (3.4%) from the same quarter of 2004, and $35 million (2.3%) higher than Q2-05. The increase in noninterest income over Q3-04 was driven by favorable variances in the majority of fee income categories, partially offset by an $87 million reduction in securities gains (losses). Credit and debit card revenue and corporate payment products revenue were both higher in Q3-05 than Q3-04 by $21 million and $27 million, or 12.8% and 25.0%, respectively. The growth in credit and debit card revenue was driven by higher transaction volumes and rate changes. The allowance for credit losses was $2,258 million at September 30, 2005, compared with $2,269 million at June 30, 2005, and $2,370 million at September 30, 2004. The ratio of the allowance for credit losses to period-end loans was 1.65 percent at September 30, 2005, compared with 1.70 percent at June 30, 2005, and 1.90 percent at September 30, 2004. Wachovia Reported Net Income of $1.06 per share - Up from 96 in Q3-04 PRNewswire 10-17 Wachovia Corp. reported record net income of $1.67 billion, or a record $1.06 per share, in Q3-05 compared with $1.26 billion, or 96 cents per share, in Q3-04. Excluding after-tax net merger-related expenses of 3 cents per share in Q3-05 and 4 cents in Q3-04, third quarter 2005 earnings were $1.72 billion, or a record $1.09 per share, compared with $1.32 billion, or $1.00 per share, in Q3-04. Compared with the third quarter of 2004, Wachovia: [1] Increased revenue 19%; [2] Grew net interest income 14%; and [3] Generated 25% fee and other income growth. Net interest margin was 3.20& in Q3-05, 3.23% in Q2-05 and 3.36% in Q3-04. Return on average common stockholders' equity was 13.95% in Q3-05, 14.04% in Q2-05 and 15.12% in Q3-04. The Overhead efficiency ratio was 59.78% in Q3-05, 59.29% in Q2-05 and 65.20% in Q3-04. Net interest margin was 3.20% in Q3-05, 3.23% in Q2-05 and 3.31% in Q3-04. Wells Fargo Reports EPS of $1.16 - Up 14% BusinessWire 10-19 Wells Fargo reported record diluted EPS of $1.16 for Q3-05, up 14% from $1.02 in Q3-04. Net income was a record $1.98 billion, up 13% from $1.75 billion in Q3-04. Net income to average total assets (Return on Assets) was 1.75% in Q3-05 vs. 1.66% in Q3-04. ROE was 19.72% in Q3-05 vs. 19.34% in Q3-04. The Efficiency ratio was 57.5% in Q3-05 vs. 57.7% in Q3-04. Net interest income increased 6 percent from third quarter 2004 and 12% (annualized) on a linked-quarter basis reflecting solid loan growth (other than ARMs) and a relatively stable net interest margin. Average earning assets grew 6% year-over-year and 12% (annualized) on a linked-quarter basis, or 14% and 25%, respectively, excluding real estate 1-4 family first mortgages. Net interest margin of 4.86% was down 3 basis points from both a year ago and Q2-05, with the positive impact on the margin from balance sheet repositioning actions offset by the increase in the mortgage warehouse on a linked-quarter basis. "Given the prospect of higher short-term interest rates and a flatter yield curve, beginning in Q2-04 we started a program of selling our lowest-yielding ARMs. From Q2-04 through the Q3-05, we sold $60 billion in ARMs at an average yield of 4.22%, realizing losses during these six quarters of approximately $350 million. As a result, however, the average yield on our 1-4 family first mortgage portfolio -- which includes ARMs -- increased from 5.19% on an average balance of $89.4 billion in Q2-04 to a yield of 6.60% on an average balance of $72.5 billion in Q3-05. With ARM yields in the 5.5% range at quarter-end, we held ARMs at yields that were more than 1% higher than the average yield on all the ARMs sold since Q2-04," said Atkins. Noninterest income increased $927 million, or 32%, from Q3-04. "Double-digit growth in noninterest income reflected strong results across our businesses including double-digit growth in trust and investment fees, card fees, other fees, mortgage banking and strong capital markets results," said Atkins. Q3-05 net charge-offs were $541 million (.73% of average loans outstanding, annualized) compared with $454 million (.62%) in Q2-05 and $407 million (.59%) a year ago. The increased losses during Q3-05 were driven by increased consumer bankruptcies in advance of the bankruptcy reform legislation, continued loan growth and seasoning at Wells Fargo Financial, and a return to modest commercial losses after a net recovery in Wholesale Banking in Q2-05. September Ratings Changes On 9-07 Piper Jaffray Upgraded JPM from Market Perform to Outperform. On 9-16 A.G. Edwards and Citigroup Research downgraded FITB to "hold" from "buy," Credit Suisse First Boston cut it to "neutral" from "outperform," and Prudential cut it to "underweight" from "neutral weight." Deutsche Bank upgraded the two Swiss banking giants, UBS and Credit Suisse Group [CSR: $46.22 P/E 13.06 and yielding 2.80% as of 9-09], to buy from hold. For both banks, Deutsche upped estimates on higher assets under management in the private banking operations and the prospect of a sustained increase in M&A activity. Deutsche also is of the view that the rest of the European banking sector is seeing an erosion of free cash flow generation, but that the cash flow generative nature of private banks will allow UBS and Credit Suisse to continue with buybacks. (Steve Goldstein, MarketWatch 9-07) August Ratings Changes On 8-25 Sandler O'Neill Upgraded STI from Hold to Buy, reversing the 7-20 Downgrade from Buy to Hold. On 8-11 Goldman Sachs Upgraded NFB from Underperform to In-Line. From David Weidner, MarketWatch 8-15: Merrill upgraded PNC to buy from neutral, citing increased confidence in its earnings estimates for 2006, strong earnings momentum in the second half of 2005 and 2006 and PNC being well positioned to benefit from the current interest-rate backdrop. In addition, the broker told clients it believes the market isn't fully grasping the EPS growth implications of PNC's recently unveiled "One PNC" efficiency improvement initiative. Monthly Mid-Cap Bank Sector Summary During September, mid-cap banks fell 3.67% to a year-to-date loss of 6.23% and yields ended at 3.58% [vs August's 3.44% - a rise of 14 basis points]. The ten year treasury ended the month at 4.33% [vs 4.02% on 8-31 - a rise of 31 basis points]. During August, mid-cap banks fell 2.74% to a year-to-date loss of 2.71% from June's year to date rise of 0.13% and yields ended at 3.44% [vs July's 3.32% - a rise of 12 basis points]. The ten year treasury ended the month at 4.02% [vs 4.28% on 7-29 - a rise of 26 basis points]. During July, mid-cap banks rose 4.13% to a year-to-date gain of 0.13% from June's loss of 3.78% and yields ended at 3.32% [vs June's 3.46% - a fall of 14 basis points]. The ten year treasury ended at 4.28% [vs 3.91% on 6-30 - a rise of 37 basis points]. During June, mid-cap banks rose to a year-to-date loss of 3.78% from May's loss of 5.98% and yields ended at 3.46% [vs May's 3.56% - a rise of 10 basis points]. The ten year treasury ended the month at 3.92% [vs 4.00% on 5-31 - a fall of 8 basis points]. Hurricanes to Factor in Southern Bank Results Robert Schroeder, MarketWatch 10-13 A trio of Southern banks is scheduled to report earnings next week for the quarter that includes the deadly hurricanes Katrina and Rita. Two of the three -- AmSouth Bancorporation (ASO) and Synovus Financial Corp. (SNV) -- are expected to report higher earnings than their year-ago numbers. A third, First Horizon National Corp. (FHN) is seen reporting lower earnings than last year's. But analysts polled by First Call are expecting Memphis, Tenn.-based First Horizon to bounce back from the second quarter, when it reported earnings per share of 80 cents after its mortgage banking income took a hit. For the third quarter, analysts see First Horizon reporting earnings of 87 cents a share. It earned 89 cents a share in the third quarter of 2004. First Horizon reports earnings Oct. 17 before the opening bell. Birmingham, Ala.-based AmSouth, meanwhile, is seen reporting earnings of 51 cents a share, up from 48 cents a year ago but off a penny from second quarter 2005 results. JPMorgan analyst Monique Sinmao says AmSouth's management might book a special provision due to Katrina and Rita. She noted about 5% to 10% of its branches were shuttered for part of September due to the massive storms. "While we expect hurricane rebuilding and customer insurance payouts ultimately will become a source of loan and deposit growth, we could see some near term credit hit," she wrote in a research note Tuesday. AmSouth is due to report Oct. 18 before the market opening. First Call analysts estimate Columbus, Ga.-headquartered Synovus will report third quarter earnings of 42 cents a share, up one cent from the second quarter. That's 7 cents above the third quarter 2004 results of 35 cents a share. Synovus is scheduled to report the morning of Oct. 19. The company hasn't set a specific time yet. The bank has recently been buying up other institutions. In September, Synovus said it planned to buy Riverside Bancshares (RSBK) for $29.65 a share in a deal valued at $174 million. In 2004, Synovus acquired Peoples Florida Banking Corporation and Trust One Bank. August Ratings Changes On 8-26 Sun Trust Rbsn Humphrey Initiated coverage of SUSQ at Neutral. On 8-26 Sun Trust Rbsn Humphrey Initiated coverage of FULT at Buy. On 8-22 AG Edwards Upgraded TCB from Hold to Buy. On 8-18 JP Morgan Initiated coverage of SUSQ at Underweight. On 8-17 Prudential Initiated coverage of WL at Neutral. On 8-16 Advest Initiated coverage of FULT at Buy. From Lisa Sanders, MarketWatch 8-25: Shares in AmSouth fell 24 cents to $26.09 Thursday after Punk Ziegel downgraded the stock to market perform from buy. The SEC issued a Wells notice, which is non-public, to AmSouth, informing the bank that the agency may bring action against it for alleged violations of federal securities laws. The potential violations relate to the company's mutual fund business. "This puts the bank in a position where outsiders simply have no idea what is happening internally," said Dick Bove, an analyst at Punk Ziegel, in a note to clients. "The risk has become greater than the reward in this situation." NOTE: Please confirm through your own research any numbers on which you are to make a buy, sell or hold decision. The page is ment to be a supliment for those already getting monthly sector updates from their broker. It is the goal of this page to provide more timely data - and perhaps cover a wider array of stocks and different valuation metrics. Data entry errors sporadically happen. Home Page Factoids Previous Update |