Chase, Citicorp Improve Performance In Q1

Chase Manhattan and Citicorp, the two largest US banks, both announced first-quarter results sharply ahead of analysts expectations on Tuesday.

Chase Manhattan reported what analysts believed to be the first clear-cut savings as a result of its 1995 merger with Chemical Banking, and improved its earnings despite revenue growth which Walter Shipley, chief executive, admitted was below target.

Its efficiency ratio (total expenses as a proportion of revenue) improved from 58 to 54.5 per cent, thanks to a 2 per cent fall in expenses. This reflected incremental merger savings of $205 million.

Chase also repurchased $609 million in common stock during the quarter.

 

Net income was $927 million, against a loss of $89 million in the equivalent quarter last year, when Chase took a merger-related charge of $1.026 billion.

Citicorp, the only large US commercial bank to eschew significant acquisitions in the past few years, grew despite relatively heavy growth of 11 per cent in its operating expenses compared with the equivalent quarter of 1996.

John Reed, chief executive, made it clear the bank intended to expand aggressively, particularly in emerging markets.

Net income rose 9 per cent, from $914 million to $995 million, despite a $60 million pre-tax charge to cover the award of performance-based options to executives.

The proportion of loans written off on its US credit cards increased to 5.91 per cent, up from 5.45 per cent in the preceding quarter, and 4.38 per cent in the first quarter of last year.

Net income from cards worldwide fell $37 million, or 14 per cent, to $224 million compared with the previous quarter.

However, Citicorps expansion into emerging markets continued, with net income growing by $60 million to $450 million, despite a 19 per cent increase in expenses in the area.

This was caused by its embedded bank strategy, aimed at recruiting new customers.

According to Tom Jones, a Citibank director: Quite frankly, the returns in the US dont cover the risks one takes as well as they do in the emerging markets.

That is where we think our expertise lies.

By midday on Tuesday, Citicorp shares were up $2 at $108 5 /8, while Chases rose $1 7 /8 at $92 3 /8.