branch despite dropoff in
corporate earnings. (Tom Croke)
FleetBoston Financial (FBF-NYSE) on July 18 reported second-quarter earnings of $531 million, or $.48 per share, compared with $971 million, or $.87 per share in the second quarter of 2000.
For the first six months of 2001, earnings before strategic charges were $1.4 billion, or $1.26 per share, vs. $2.05 billion, or $1.84 per share, a year ago. Return on assets and return on equity for the quarter were 1.01 percent and 11.1 percent, respectively, compared with 1.74 percent and 22.5 percent a year ago.
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The company said the pronounced fallout in the capital markets was the predominant factor in the $.39 per share decline from the prior year. The combined earnings of the corporation’s primary capital-markets units — Principal Investing, Robertson Stephens, and Quick & Reilly — fell by $500 million or $.46 per share from a year ago.
More than 80 percent of this decline was incurred in Principal Investing where $290 million of after-tax write-downs ($.27 per share) were taken against the carrying value of investments held in its $4 billion portfolio. These adjustments were made to reflect the significant valuation impairment the private equity industry is experiencing, particularly in the technology and telecommunication sectors.
The sale of Fleet Mortgage resulted in an after-tax charge of $60 million ($.06 per share) related to the final disposition of the company in the second quarter.
Offsetting the charges were earnings growth from various business lines such as international and commercial finance, higher syndication and cash management fees, merger-related cost savings, expense reductions from the corporate cost containment program and an increase in gains from prior-year divestitures to Sovereign Bancorp.
“The operating environment for our capital-markets businesses is clearly quite difficult,” said Chad Gifford, FleetBoston financial president and chief operating officer. “Our Principal Investing business, as well as others in this industry, have been particularly hard hit.
“The sizable write-down we took on the Principal Investing portfolio this quarter evidences our intent to recognize current marketplace realities and to be preemptive in our approach,” Gifford said. “This action follows a thorough review of all our investments especially in the information technology and telecom sectors. From this, we determined that certain valuations were impaired and write-downs totaling approximately 10 percent of the portfolio were warranted.”
Terrence Murray, chairman and chief executive officer of FleetBoston commented, “While very weak capital markets are causing us cyclical earnings pressure, there are many other parts to FleetBoston and many positive stories to be told. Several of our businesses posted earnings growth over the first quarter.”
Murray said FleetBoston completed the sale of its mortgage company and announced the acquisition of Liberty Financial’s asset-management unit during the second quarter.
Murray continued, “Until discernible improvement in the environment occurs, we consider it prudent to assume the contribution of our capital-markets businesses to be modest. On the other hand, we expect most of our other businesses to remain on target for growth.
“Given these assumptions, we expect our earnings performance to rebound to approximately $1.50-$1.60 per share for the second half of this year (approximately $2.75-$2.85 of operating earnings for 2001),” Murray said. “For 2002, we would expect earnings to be within a range of $3.60-$3.90 per share (inclusive of the new rules governing goodwill amortization).”
Washington Trust reports earnings
Washington Trust Bancorp, Inc. (WASH, NASDAQ), parent of The Washington Trust Company, on July 19 reported net income of $3.8 million, or 31 cents per diluted share, for the three months ended June 30, 2001. Earnings for the second quarter of 2001 increased by 15.7 percent from the $3.3 million, or 27 cents per diluted share, of operating earnings reported for the second quarter of 2000.
The corporation’s operating earnings exclude a first quarter 2001 litigation settlement of $3.3 million, net of tax (28 cents per share). It also excludes costs of $1.1 million, net of tax (9 cents per share) recorded in connection with an acquisition in the second quarter of 2000 and includes an adjustment for pro-forma income taxes on the pre-acquisition earnings of the acquired company.
“We are pleased to report higher operating earnings and excellent rates of return on both assets and equity,” said John C. Warren, Washington Trust Chairman and Chief Executive Officer. “In addition, we have seen strong residential lending activity and we continue to experience excellent asset quality results.”
Net income for the six months ended June 30, 2001 and 2000 amounted to $4.0 million and $5.8 million, respectively. Earnings on an operating basis for those periods were $7.3 million, or 60 cents per diluted share, compared to $6.5 million, or 54 cents per diluted share. Operating earnings increased by 12.1 percent from the operating earnings reported for the same period in 2000.
For the second quarters of 2001 and 2000, Washington Trust’s net interest income amounted to $9.3 million. Net interest income for the six months ended June 30, 2001 amounted to $18.9 million, compared to $18.5 million for the corresponding 2000 period.
Total assets amounted to $1.321 billion at June 30, 2001, up 8.5 percent from the December 31, 2000 balance of $1.218 billion. Total loans amounted to $610.0 million at June 30, 2001, up $12.9 million from the December 31, 2000 sum of $597.2 million.
Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company, a Rhode Island state-chartered bank founded in 1800.
