released upbeat third-quarter numbers today, providing another in a string of solid results for U.S. banks.
Chase, the second-largest U.S. banking company after
, reported that its earnings rose to $1.19 billion, or $1.37 a diluted share, from $738 million, or 82 cents a share, a year earlier. Chase beat the
First Call/Thomson Financial
analyst consensus by a nickel.
Net income in the 1998 third quarter included one-time gains that brought it to $837 million, or 94 cents a share.
Wall Street greeted the upside surprise with its usual enthusiasm, sending Chase's stock up 2 3/4 to 73 7/8 by midday.
The 61% rise in Chase's earnings reflects a solid recovery from last year's turbulent third quarter, marked by worldwide financial pressures including Russia's staggering default. The numbers tell the story. The pre-tax earnings of its global markets business, comprised of its currency and fixed-income operations, rose 64% over last year, while the operating revenue of its global investment banking business doubled.
The return on shareholder equity was 22%.
The only red flag in the numbers was the increase in non-performing loans for foreign commercial banks. That figure was $950 million, up 70% from a year ago and up 33% from the second quarter this year.
"It's been a very strong quarter and the non-performers are still at low levels," Tanya Azarchs, bank rating analyst at
Standard and Poor's
, said. "However, most other large banks had flat or improving non-performing loans."
There has been considerable speculation that Chase has actively sought to acquire a bulge-bracket investment banking operation, especially after rival Citibank merged with
Salomon Smith Barney
unit last year. That merger has apparently only served to help Citigroup, which reported a third-quarter 1999 profit leap of 236%. Another point of comparison between the two competitors: Chase's price/earnings ratio is currently 14.78 times, while Citigroup's is 18.60.
Last month, Chase announced its intention to purchase boutique investment bank
Hambrecht & Quist
Chase's overall prospects continue to look good, analysts say. "I expect Chase to continue performing strongly," Azarchs said. "The tone of their business is very strong."