NatWest arm ahead in patchy US recovery

UNEVEN fourth-quarter profits from several American banks yesterday demonstrated the patchiness of the US banking recovery.

NatWest Bancorp, the formerly troubled US arm of National Westminster Bank, made a healthy dollars 50.1m (dollars 32.7m) profit in the fourth quarter of 1992 to complete a dramatic turnaround for the year.

Bancorp reported record net income of dollars 165.7m for the year, after a 1991 loss of dollars 371.5m. Fourth-quarter net income of dollars 50.1m compared with a fourth- quarter 1991 loss of dollars 29.8m.

But unexpectedly weak operating earnings at JP Morgan, America's most profitable bank, pushed its high-flying shares down sharply in New York, despite an 11 per cent rise in the bank's overall profits in the fourth quarter to dollars 292m.

For the full year, JP Morgan earned dollars 1.38bn or dollars 6.92 a share, compared with dollars 1.15bn or dollars 5.80 a share in 1991.

The fourth-quarter operating results, about dollars 1 a share, came in almost a third below Wall Street expectations, largely because of disappointing returns from the sale of investment securities and the bank's worst trading performance in three years.

JP Morgan lost an unspecified amount trading mortgage-backed securities, while interest income fell because some high-yielding assets had matured and the proceeds were reinvested at lower rates. Expenses also rose 19 per cent to dollars 747m for the final quarter.

Several industry analysts lowered investment ratings of the bank after the results.

Natwest Bancorp, a 260-branch retail bank in New York and New Jersey, had a run of eight quarterly consecutive losses coinciding with the sharp downturn in property prices in the north-eastern US. After austere cost-cutting and credit control, the bank moved back into profit in the first quarter of 1992.

John Tugwell, chairman and chief executive, attributed the turnaround to improved loan quality and cost management. Developing fee-based products such as annuities, mutual funds and private banking increased revenues. Both non-interest income and net interest income grew.

'We are delighted with our results and what we have accomplished in the past year,' he said. 'I believe we have set a firm foundation for the future.'

Loan loss provisions for 1992 were dollars 122m, sharply down from dollars 567m in 1991. Non-performing loans declined to dollars 1bn from dollars 1.2bn, and loan write-offs were halved to dollars 201.6m.

In London, NatWest's shares rose 9p to 409p on the better-than- expected fourth-quarter Bancorp results. Estimates of the group's 1992 profits ranged from pounds 400m to pounds 500m, after pounds 110m in 1991.