Marshall & Ilsley Beats Analysts' Loss View
MILWAUKEE (
) -- Following the pattern for several regional banks with loan quality concerns,
Marshall & Ilsley
(MI)
Tuesday came in ahead of Wall Street's loss expectations for the first quarter.
The bank holding company reported a first quarter loss of $140.5 million, or 27 cents a share, 13 cents narrower than the average estimate of analysts polled by
Thomson Reuters
for a loss of 40 cents per share in March period.
The performance was an improvement from its fourth-quarter net loss of $259.5 or 54 cents a share. In the year-ago equivalent period, Regions lost $116.9 million, or 44 cents a share.
The latest results include the payment of $25.1 million, or 5 cents a share, in dividends on preferred shares held by the U.S. Treasury stemming for the $1.7 billion in bailout money Regions received in November 2008 via the Troubled Assets Relief Program, or TARP.
Again following the pattern for several regional banks, including
(RF) - Get Report
and
(ZION) - Get Report
, M&I's earnings improvement mainly resulted from a reduced provision for loan losses, which declined to $458 million during the first quarter from $639 during the fourth quarter and $478 million a year earlier.
Here's a quick snapshot of the company's asset quality:
Marshall & Ilsley's loan quality showed some signs of turning a corner, although loan loss reserves appeared a bit low in relation to the pace of loan losses. The annualized ratio of net charge-offs to average loans was 3.94%, improving from 5.01% in the fourth quarter, but still quite high when compared to the fourth-quarter national aggregate net charge-off ratio of 2.89%, as reported by the Federal Deposit Insurance Corp.
M&I's ratio of loan loss reserves to total loans was 3.55% as of March 31, which was "behind the pace" of charge-offs, however, the company said that early-stage loan delinquencies were continuing to decline and the company's nonperforming assets ratio improved to 4.26% as of March 31, from 4.33% the previous quarter. Nonperforming assets include non-accrual portfolio loans and repossessed real estate. Loan losses also declined on a linked-quarter basis, to $423 million in the first quarter, form $639 million during the fourth quarter.
Total assets were $56.6 billion as of March 31, declining 8% over the past year as the company reduced its construction loan portfolio and also suffered weak demand, including lower utilization of commercial credit lines. Meanwhile, deposits increased 6% year-over-year and the dissipation of excess liquidity helped M&I increase its net interest margin -- the difference between a bank's average yield on loans and investments and its average cost of funds -- to 3.13% from 2.95% the previous quarter and 2.82% a year earlier.
While regulatory capital ratios weren't yet available, the company reported a ratio of total equity (including the TARP money) to total assets of 12.2% and a tangible common equity ratio of 8.1% as of March 31.
CEO Mark Furlong expressed confidence that "a credit quality recovery is underway at M&I."
The stock was rallying in response to the results, adding 7.1% to $9.01 in recent trades. Including that move, it's now up roughly 60% year-to-date.
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Written by Philip van Doorn in Jupiter, Fla.
Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.









