(July 18) – “Bank of America Corp., FleetBoston Financial Corp. and Bank of New York Co. reported solid second-quarter results amid sharp volatility in their securities-related businesses,” according to a story in today’s Wall Street Journal written by John Hechinger, Carrick Mollencamp and Paul Beckett.

“While meeting or topping Wall Street’s profit estimates, Bank of America and FleetBoston said their underwriting fees were hurt by a sharp sell-off in the Nasdaq Stock Market. Bank of New York benefited from its securities-processing businesses, which flourished on heavy trading.”

“National City Corp., meantime, turned in better-than-expected results for the second quarter, aided by strong loan demand and a nonrecurring gain.
The results demonstrate banks’ reliance on more-volatile businesses outside their traditional fields of profiting from the difference between what they pay for deposits and what they charge for loans.”

“Bank of America, Charlotte, N.C., said second-quarter net income rose 7.7% to $2.06 billion, or $1.23 a diluted share, from the year-earlier $1.92 billion, or $1.07 a share, which included a $145 million merger charge. The results matched analysts’ expectations, according to the mean estimate of analysts polled by First Call/Thomson Financial.”

“Still, excluding the charge, Bank of America’s second-quarter income was flat compared with operating income of $2.06 billion in the second quarter of 1999.”

“The bank did quell some concern that its traditional banking business — generating deposits and loans — was lagging. Deposit and loan growth were strong, and net interest income rose 1% to $4.71 billion from $4.66 billion in the year-ago quarter.”

“That performance enabled Bank of America to counter a downturn in noninterest income, which fell by 0.6% to $3.5 billion. Investment banking, partly hurt by weaker underwriting fees, fell by 11% to $373 million from $421 million.”

“In a conference call with analysts and in an interview, Chief Financial Officer James Hance said Bank of America is committed to slashing more jobs until its efficiency ratio, a measure of the cost of generating each dollar in revenue, hits 50.”

“At the end of the second quarter, the ratio stood at 54. The bank had 150,854 full-time employees at the end of the second quarter, compared with 161,919 a year earlier. Mr. Hance told analysts that new ways to deal with customers, such as the Internet or call centers, will enable more jobs to be cut. He didn’t elaborate on the size of the job reduction.”

@page_break@”FleetBoston Financial reported second-quarter operating earnings of $772 million, or 83 cents a diluted share, up 10% from net income of $700 million, or 72 cents a share, in the same quarter of 1999. The results beat analysts’ expectations by a penny a share, according to First Call/Thomson Financial.”

“The latest quarter included a gain related to deposit divestitures in the wake of the company’s purchase of BankBoston Corp. last year. Including the gain, FleetBoston reported net income of $847 million, or 91 cents a share.”

“FleetBoston’s capital-markets businesses, which include its Quick & Reilly brokerage firm, Robertson Stephens investment bank and its venture-capital operations, contributed $813 million in revenue, up sharply from $503 million the year before.”

“But that figure represented a 23% decline from this year’s rip-roaring first quarter, when the company racked up more than $1 billion in revenue from those operations. The reason: smaller fees and investment gains from initial public offerings. Gerard Cassidy, an analyst with Tucker Anthony, said some investors may be disappointed in the slowdown after “off-the-charts” results in the first quarter.”

“Eugene McQuade, FleetBoston’s chief financial officer, said the bank’s core businesses, such as retail banking and small-business lending, made up for the slowdown in the securities markets. The results ‘show the strength of the company’s diverse businesses,’ he said.”

“Bank of New York also beat analysts’ expectations by a penny, reporting earnings per diluted share of 48 cents for the second quarter, up 14% from 42 cents the same period the year before. Net income rose 10% to $356 million from $323 million.”

“Profit was bolstered by the bank’s increasing focus on fee-based businesses such as securities servicing, rather than on income from interest-rate spreads or from market trading. Fees from the securities-servicing businesses were $403 million, up 33% from a year earlier and up 8.3% from the first quarter. The bank said noninterest income represented 63% of total revenue in the second quarter, up from 61% a year earlier.”