S&P lowers ratings for M&I after third quarter earnings announced; Bank Mutual Corp. reports lower 3Q earnings; U.S. Bancorp reports record quarterly net revenues
S&P lowers ratings for M&I after third quarter earnings announced
Standard & Poor’s Rating Services (S&P) has lowered its rating of Milwaukee-based Marshall & Ilsley Corp. to BB+/B from BBB-/A-3. The ratings agency also lowered its counterpart credit ratings on Marshall & Ilsley Bank to BBB/A-3 from BBB/A-2.
S&P’s outlooks on both entities remain “negative.”
In its announcement about the lowered ratings, S&P said it believes that net losses could continue at M&I for the next several quarters.
“We think the net reduction in nonperforming assets in recent quarters largely results from the high level of net charge-offs and aggressive loan sales activity, although we view favorably the significant decline in net inflows of nonaccrual loans,” the report stated. “Furthermore, we see continued pressure on capital ratios given that we expect net losses to persist. The rating action also reflects, in part, our review of the bank’s recent financial performance, which has lagged our expectations and those of certain similarly rated large regional bank peers, in our assessment.”
Marshall & Ilsley Corp. on Wednesday reported a $169.2 million net loss for the third quarter. The company has had a $483.5 million net loss for the first none months of the year. The firm had $599.3 million in net losses for the first nine months of 2009.
“We expect loan performance to remain weak throughout 2011 given the bank’s relatively high commercial real estate and construction loan exposures,” the S&P report stated. “We think net charge-offs could remain elevated given the company’s strategy of selling nonperforming loans. We also think additional losses are possible within the construction-and-development loan portfolio, which although down significantly, still remains large at approximately nine percent of total loans and leases, and includes significant exposures to still-weak markets such as Arizona and Florida.”
Marshall & Ilsley also announced that Mark Furlong, president and chief executive officer, has been named to the additional position of chairman of the board. Furlong joined M&I in 2001 as senior vice president and chief financial officer. He was elected president of M&I M&I Bank in 2004, president of Marshall & Ilsley Corp. in 2005, and was named chief executive officer in 2007.
Furlong succeeds Dennis Kuester, who has retired as chairman. Kuester was chairman since 2004 and will remain a member of the board of directors.
M&I also announced that Thomas Ellis has been named president of M&I Marshall & Ilsley Bank. Ellis will succeed Furlong, who will continue to serve as chairman and chief executive officer of M&I Bank. Ellis also will become a member of the board of directors of M&I Bank. Ellis joined M&I Bank as assistant vice president and commercial lender in 1988.
Bank Mutual Corp. reports lower 3Q earnings
Bank Mutual Corp. reported $926,000 in income for the third quarter of 2010, compared to $1.2 million during the third quarter of 2009. The bank had $3.8 million in net income for the first nine months of 2010, compared to $12.3 million for the same period of 2009.
"Due to the difficult economic environment, new loan demand has been restrained and our liquidity position continues to build, causing a negative impact on our net interest margin,” said Michael Crowley, Jr., chairman and chief executive officer of the bank. “However, we believe this liquidity and our strong capital position give us flexibility to successfully manage through the current operating environment and to take advantage of strategic opportunities."
Bank Mutual’s net interest income declined by $3.6 million during the third quarter, compared to the same time in 2009, largely because of a decrease in the bank’s interest rate spread between the periods and a decrease in average earning assets between the periods.
U.S. Bancorp reports record quarterly net revenues
Minneapolis-based U.S. Bancorp, the second-largest bank in Wisconsin (by deposits), reported third quarter net income of $908 million, or 45 cents per share, up from $603 million, or 30 cents per share, in the same period a year ago.
The parent company of U.S. Bank was propelled by record quarterly total net revenue of $4.6 billion.
The company saw a surge in new lending activity of $54.8 billion during the third quarter, including: $12.1 billion of new commercial and commercial real estate commitments, $18.8 billion of commercial and commercial real estate commitment renewals, $1.4 billion of lines related to new credit card accounts and $22.5 billion of mortgage and other retail originations.
U.S. Bancorp chairman, president and chief executive officer Richard Davis said, "Our third quarter results, once again, reflected the Company’s financial strength, fundamental operating model and business line momentum, as record total net revenue and reduced credit costs drove third quarter net income of $908 million, or $.45 per diluted common share. Growth in total net revenue year-over-year can be attributed to an increase in net interest income, the result of higher earning assets and an expanded net interest margin. Noninterest income grew, albeit at a slower pace, year-over-year, as increases in payments-related revenue and our other fee-based businesses were partly offset by expected headwinds from recent legislative actions and current economic conditions.”
