FleetBoston Financial Corp., the
seventh-biggest U.S. bank by assets, said it may miss its 2003
profit estimate because weak economic growth has cut demand for
corporate loans. The shares had their biggest drop in a month.
The bank’s January forecast for net income of $2.50 a share
may be a “stretch,” Chief Financial Officer Robert Lamb said on
a conference call with analysts, after posting a fourth straight
quarterly profit.
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“If the economy doesn’t turn around (and) if rates do not
increase, then we’re still comfortable seeing earnings growth each
quarter in the second half of the year,” Lamb said in an
interview. “But they’re not going to rebound strong enough to
make $2.50.”
Chief Executive Officer Charles Gifford closed the technology-
based investment bank Roberston Stephens last year, and is cutting
1,900 jobs this year to reduce costs. Gifford, 60, is focusing on
credit cards, home equity loans and mortgages to boost profit.
The bank is expected to earn $2.38 a share this year,
according to a survey of 22 analysts by Thomson Financial. Lamb
said that estimate is “more realistic.” Most analysts had
already reduced their estimates, said Mark Fitzgibbon, an analyst
at Sander O’Neill & Partners in New York.
“This is a classic example of when outsiders sometimes have
a better view of the macroeconomic situation than the insiders of
the company,” said Fitzgibbon, who rates the shares “hold” and
doesn’t own the stock.
FleetBoston shares fell 98 cents, or 3.1 percent, to $30.56
at 3:05 p.m. on the New York Stock Exchange, on track for its
biggest drop in a month. The shares have risen 27 percent this
year, making it the fourth-best performer on the 24-member KBW
Philadelphia Bank Index.
Consumer Lending
The bank earlier today said it posted its fourth straight
quarterly profit as it cut investment-banking costs and increased
consumer lending.
Second-quarter net income was $624 million, or 59 cents a
share, from a loss of $386 million, or 37 cents, in the year-ago
period, the Boston-based bank said. That beat the 58-cent-a-share
average estimate for net income from 20 analysts surveyed by
Thomson Financial.
Consumer borrowing has been driving growth at U.S. banks.
Wells Fargo & Co., the biggest U.S. home lender, said second-
quarter profit rose 7 percent as the lowest mortgage rates on
record extended a refinancing boom that began in April last year.
Citigroup Inc. and Bank of America Corp., the two biggest U.S.
banks by market value, said yesterday second-quarter earnings rose
more than analysts expected, driven by demand for mortgages and
credit cards.
Net income from continuing operations was $571 million, or 54
cents a share, from a loss of $106 million, or 11 cents.
FleetBoston said revenue rose 4.7 percent to $2.78 billion,
while non-performing assets fell by a third to $2.6 billion. Loans
rose 6.6 percent to $123.9 billion.
Bloomberg News
