Astoria's Profit Sinks

The thrift prepares for a rough trading day.
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Astoria Financial

(AF)

, the New York metropolitan area lender, reported a poor third quarter and is poised to trade lower Friday.

The thrift, late Thursday, said profit fell 31% in the third quarter and fell short of analyst expectations.

In the quarter, Astoria earned $41 million, or 43 cents a share, compared to $59.2 million, or 57 cents a share, in the year-ago period.

Analysts, as surveyed by Thomson Financial, were looking for earnings of 45 cents a share.

Net interest income, the profit derived from its lending and deposit operation, fell to $90.7 million from $118.5 million.

The lender's net interest margin -- a measurement of the profitability of its lending and deposit business -- shrunk to 1.75%, one of the skimpiest in the banking sector.

The bank blamed its woes on a tricky interest rate environment, in which the spread between short-term and long-term rates has been squeezed.

The narrowing spread has made it difficult for banks, thrifts in particular, to generate fat profits from reinvesting customer deposits into high-yielding assets.

The bank says to combat this problem it is continuing to shrink its balance sheet "by reducing the securities portfolio and borrowings, growing loans and deposits and repurchasing our stock.''

Astoria shares closed Thursday at $30.