Weak trading and Mexico blamed as US banks suffer

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The Independent Online
American banks including Chase Manhattan and Chemical yesterday blamed wretched trading conditions and last month's Mexican crisis for disappointing results for the last quarter of 1994.

Chase's net income for the quarter fell by 27 per cent compared with the previous year, to $229m. "Total trading revenue was $32m, down $136m from the fourth quarter of 1993, reflecting the overall adverse global market conditions, including the negativeeffects related to the Mexican peso devaluation," the bank said.

Chase, Chemical, Wells Fargo and NationsBank all suffered falls on the US stockmarkets yesterday as brokers digested the bad news. Chemical suffered a $70m hit due to losses sustained from unauthorised foreign exchange transactions involving the Mexican peso, as previously reported.

Overall, Chemical's trading revenues were $45m for the fourth quarter against $255m last time.

Analysts had expected Chase to earn $1.05 to $1.35 a share in the fourth quarter, but Raphael Soifer, analyst at Brown Brothers Harriman, put operating earnings at $0.42 a share.

For 1994 as a whole the American banks did better. Chase reported full-year net income of $1.2bn, up a quarter from 1993.

Thomas Labrecque, chairman, said: "For 1994, Chase reported record earnings, despite the volatitilty in the global trading markets as well as increasing competition in all of our core business activities." He said the last quarter had been "extremely challenging given the difficult trading environment".

This environment was made up of three things, the most significant of which was the overall weakness in global markets during the 1994 fourth quarter.

He said the devaluation of the Mexican peso on 20 December 1994, and the subsequent deterioration in the emerging markets generally, also resulted in a drop in trading revenue. Trading revenue was also hurt by the continued weakness in derivative marketsin general and by the failure of a few counterparties to fully perform on their obligations, he said.

Chemical reported net income for the fourth quarter of $331m, down from $347m last time. This was before a previously announced restructuring charge of $260m. Overall for the year 1994, net income rose 11 per cent to $1.4bn.

Walter Shipley, chairman and chief executive officer of Chemical, said: "Despite a difficult operating environment . . .we believe the series of intitiatives we announced in December will lift the corporation to a new level of performance."

In December Chemical announced a two-year programme designed to produce earnings per share growth of more than 15 per cent in 1995 and 1996, and a return on shareholders' equity of 16 per cent in 1996.