California banking giants Wells Fargo & Co. and Security Pacific Corp. both reported lower earnings Tuesday. Both declines were smaller than securities analysts expected and helped ease investor fears about potential real estate loan problems for California banks.
Elsewhere, banking giant Citicorp, hurt by real estate and other loan problems, reported that its first-quarter net income before accounting changes plunged 70%, to $70 million from $231 million. An accounting change added $140 million to last year's first-quarter net, making the drop an even sharper 81%.
San Francisco-based Wells Fargo posted a 5% drop in first-quarter net, to $152 million. Although down slightly, the substantial real estate problems that have long been predicted by naysayers again failed to materialize in the bank's earnings. Wells Fargo's stock soared $7.50 a share Tuesday to close at $80 in New York Stock Exchange trading. Stocks of First Interstate and BankAmerica were up as well in further evidence of eased investor fears.
"Shareholders may have breathed a sigh of relief," said Donald K. Crowley, a banking analyst in the San Francisco office of Keefe, Bruyette & Woods.
Los Angeles-based Security Pacific said its earnings fell 49% to $96.5 million from $188.4 million a year earlier. The bank had previously warned that its earnings would be hurt by continuing loan problems in Australia and Great Britain. Security Pacific's stock rose $1.875 per share to finish at $26.25.
Separately, neither Wells Fargo nor Security Pacific executives at their respective annual meetings Tuesday would discuss specifics about last year's aborted merger talks between the two banks, although there were strong hints at Security Pacific's meeting that the talks remain firmly on ice.
Security Pacific Chief Executive Robert H. Smith, in response to a shareholder question, said a Wells-Security merger "is not a priority at this time."
After the meeting, Smith reiterated that point, adding that other strategies--such as dismantling the firm's merchant banking operation--are more important. Smith added that a videotape was sent to employees Tuesday containing the same message, part of an effort to put the subject to rest for employees distracted by the flurry of merger rumors.
In New York, Citicorp Chairman John S. Reed painted a bleak picture of the economy. He said an economic turnaround this year is "possible," but added: "There is little evidence of this now, nor is there reason to expect a robust recovery."
Shareholders rose to criticize Citicorp's recent financial performance and, especially, its 44% dividend cut in January.
"Resign, or do something, or jump out of the window like they did during the Depression," one shareholder said. Another fretted that the recent investment in Citicorp by a Saudi Arabian prince would lead to a Saudi takeover of the nation's largest banking concern.
Elsewhere in banking:
Union Bank in San Francisco reported first-quarter net income of $34.7 million, a slight increase from $34.6 million a year ago.
Oakland-based Golden West Financial, parent of World Savings & Loan, saw its earnings rise 11% to $53 million, its best first quarter ever. Golden West said it set aside $4.7 million for possible loan problems subsequent to a recent examination by regulators with the federal Office of Thrift Supervision.
Imperial Bancorp, Los Angeles-based parent of Imperial Bank, said California's slowing economy caused its latest quarter profit to slip 47% to $3.2 million.
Chemical Banking Corp., New York, said its quarterly earnings fell 43% to $87 million from $151.7 million a year earlier. Its results were hurt by a $135-million provision for loan losses.
Manufacturers Hanover Corp., the nation's eighth-largest bank, saw earnings slide 19% to $78 million in the quarter from $96 million a year ago.
Times staff writer Martha Groves in San Francisco contributed to this story.