Two regional banks that stuck to their traditional business
throughout the financial crisis turned in healthy results for the
last quarter of a tumultuous year in the banking industry.
U.S. Bancorp (USB) and M&T Bank Corp. (MTB), which sailed
through the crisis on a fairly even keel, pleased Wall Street with
decent results Wednesday. Both have long argued that in banking,
being conservative is better, and their results bolstered that
argument. Revenue at both banks rose.
Marshall & Ilsley Corp. (MI), however, is among the regional
banks that continues to struggle. In the fourth quarter, it set
aside more money to cover losses from soured loans. Investors were
somehow cheered as results of the Milwaukee bank, though bad, was
still an improvement from the previous period.
Three banks that focus on custody, trust, and financial
transaction processing rather than traditional lending--Bank of New
York Mellon Corp. (BK), State Street Corp. (STT), and Northern
Trust Corp. (NTRS)-- surprised Wall Street as their earnings
rebounded. Bank of New York's results benefited from the rising
value of its investment portfolio and tax benefits.
Bankers expressed optimism that the worst is behind them despite
the continued risks associated with losses tied to soured loans.
Bankers, in general, reported that fewer new customers became
delinquent, although many executives, including Bank of America
Corp.'s (BAC) Chief Executive Brian Moynihan, warned that losses
from those loans that became delinquent in previous quarters will
continue to rise.
U.S. Bancorp, the nation's sixth-largest bank by deposits,
reported a $602 million fourth-quarter profit, up 82% from a year
earlier due in large part to a string of acquisitions of failed
banks. Excluding the purchases, the Minneapolis bank posted strong
deposit inflows, although households and businesses showed little
demand for loans.
"Overall, solid results," Macquarie Capital analyst Andrew
Marquardt said in a research report on the bank.
U.S. Bancorp's revenue rose 21% from a year earlier and 3% from
the previous quarter to $4.4 billion; analysts had expected $4.3
billion. The bank charged off $1.1 billion for loans it couldn't
collect and set aside $1.4 billion for current and future loan
losses, 5% less than in the third quarter.
U.S. Bancorp's stock rose 2.4%, to $25.00.
"The coming year will not be without its challenges, including a
soft economy," the bank's Chief Executive Richard Davis said during
a conference call with investors.
M&T Bank's profit rose 34% from a year earlier to $137
million. The Buffalo bank had fewer acquisitions last year than
U.S. Bancorp, but it too benefited from households saving more and
seeking banks they consider stable. The bank had fewer losses from
soured loans.
"Credit performed generally in line with expectations," JPMorgan
Securities analyst Steven Alexopoulos wrote in a research note.
M&T's shares rose 4.3%, to $77.90.
Marshall & Ilsley reported a $234 million loss, narrower
than a year earlier and in the third quarter. "Overall, the credit
picture remains strained at MI" because the increase of loans for
which repayment is doubtful is "still at very high levels," analyst
Alexopoulos wrote.
"That said, management seemed to be tackling the credit
challenge aggressively with loan sales of more than $300 million
and a reserve build seeming to better position the company for
2010," he said. M&I's shares rose 7.2%, to $7.47.
While bank earnings, overall, continued to be less worse than in
previous quarters, Wall Street was pleased with results from the
three large trust and custody banks.
RBC Capital Markets analyst Gerard Cassidy said these banks,
however, showed strains from low interest rates that drive money
market customers to banks that pay higher interest rates, and from
a challenging environment for the securities-lending business.
Northern Trust's profit fell 41% to $200 million, but the
decline was less than analysts had expected. Its shares rose 5.5%
to $55.30.
State Street's fourth-quarter profit more than doubled to $498
million as the institutional money-management firm's revenue from
servicing and management fees strengthened.
"State Street's [earnings] numbers were the strongest" among the
three custodians, Cassidy said. It's shares rose 6.1% to
$45.80.
Cassidy said Bank of New York was the most upbeat about the
future. The company' profit jumped eight-fold to $594 million; its
stock rose 2.9%, to $30.30.
"This is the first time we've had a security gain in a quarterly
result since the second quarter of '07," CEO Bob Kelly said,
referring to the bank's gain in its securities-investment
portfolio. "So it's... a pretty solid indication of how differently
we should view the securities markets versus a year ago or two
years ago."
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com
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