Matthew Goldstein
Bank of New York Warns on Third Quarter
Matthew Goldstein
10/02/02 - 05:44 PM EDT
The nation's big banks aren't due to post quarterly earnings for two weeks yet, but it's never too early for Bank of New York (BK Quote) to disappoint investors.
The nation's oldest commercial bank, echoing a warning issued last month by J.P. Morgan Chase (JPM Quote), warned Wednesday afternoon that its third-quarter profits will come in below expectations because of rising charges on bad loans to telecommunications companies.
The bank expects to take a pretax charge of $395 million because of bad loan write-offs and losses on investments. The charge will reduce earnings by 37 cents a share in the third quarter.
Excluding the charge, the bank says it expects to report earnings of 47 cents a share, which is 3 cents below the current Thomson Financial/First Call consensus estimate.
Earnings disappointments are nothing new to the Bank of New York. In the second quarter its profits fell by 6%; earnings of 50 cents a share came in a penny below the consensus estimate. A big writedown on telcom loans was the main reason the bank incurred an 11% decline in its net income in the fourth quarter of last year.
That said, Bank of New York is far from alone in having these sorts of problems. Last month J.P. Morgan, the nation's second-largest bank, said its third-quarter earnings would come in well below analyst expectations because of the continuing poor performance of its telecom loan portfolio. The bank said the dollar value of its nonperforming loans?loan payments that are more than 90 days overdue and on the verge of defaulting -- will rise by $1 billion in the quarter.
J.P. Morgan, however, declined to predict how much it would earn in the third quarter.
Bank of New York's stock, meanwhile, plunged in Wednesday trading. The stock dropped $2.32, or nearly 8%, to $26.76. The drop outpaced the decline in other big bank stocks.