BENEFICIAL CORPORATION REPORTS ALL-TIME RECORD QUARTERLY EARNINGS; 10% Increase in Second-Quarter Earnings per Share to $1.15; Operating Fundamentals Continue Strong.
"We are pleased to report an all-time record level of quarterly operating earnings for Beneficial Corporation," said Finn M.W. Caspersen, chairman and chief executive officer. "Although the U.S. economy shows signs of slowing, loan growth remains good and credit quality strong by any relative historical measure. We anticipate another year of at least $1 billion in receivables growth, continued strong credit quality, and excellent earnings in the second half. More- over, with lending spreads widening and operating expense ratios improving, we anticipate excellent earnings results for the year 1996 as well."
As previously announced, the RAL business was significantly impacted this year when the Internal Revenue Service released payment of the earned income tax credit portion of thousands of refunds directly to taxpayers who had already received these refunds through the RAL program. This occurred despite taxpayers' written instructions to deposit the money into their accounts at Beneficial National Bank to repay their RAL loans. Due to this IRS action, Beneficial recorded a $65 million pretax loss, or $39 million net aftertax, for the RAL business during the first quarter of this year. Collection efforts on the over $313 million of RAL receivables affected by the IRS action have resulted in nearly $212 million, or almost 68%, collected to date. Collection experience indicates the provision recorded in the first quarter was sufficient. In fact, collections to date have exceeded the Company's original expectations.
For the first half, earnings fell 29% to $83.5 million from $117.1 million in the same period of 1994 because of the large first-quarter RAL loss provision. Comparable earnings per share declined to $1.52 from $2.18 in the 1994 period. Removing RAL results in both periods produces aftertax earnings of $123.3 million this year compared to $90.6 million in the first half of 1994, a 36% increase. The increase was driven by strong year-over-year performance in both Beneficial National Bank USA and consumer finance loan office operations, reflecting the benefit of excellent receivables growth. Total owned receivables at June 30 were $11,995 million, representing an increase of $391 million during the second quarter of 1995, compared to a gain of $424 million in the year-earlier period. Removing the distortive impact of foreign exchange translation in both periods produces a gain of $397 million this year compared to a gain of $376 million in the second quarter of 1994.
Total managed receivables (both owned and serviced) increased $198 million during this year's second quarter compared to a gain of $326 million a year earlier. Removing the foreign exchange translation impact in both years reveals a gain of $204 million in this year's quarter compared to a gain of $278 million a year earlier. Total managed receivables at June 30 were $13,430 million, up from $13,232 million at March 31 of this year and $11,693 million at June 30, 1994.
For the first half, total managed receivables increased $477 million compared to a gain of $482 million in the first half of 1994. Removing the foreign exchange translation impact results in an increase of $399 million this year versus $434 million in the 1994 period. Beneficial completed large securitizations of variable-rate home equity loans in the first quarters of both years.
Credit quality remains strong. While chargeoffs and delinquencies have increased modestly, the levels are well within management's expectations. Second-quarter net chargeoffs increased to $43.1 million from $32.1 million in the second quarter of 1994. As an annualized percentage of average owned receivables, net chargeoffs increased to 1.41% from 1.16% a year earlier. For the first half, net chargeoffs rose to $85.3 million from $72.1 million in the first half of 1994. However, as an annualized percentage of average receivables, first-half net chargeoffs rose only modestly to 1.36% from 1.28% in 1994.
All owned loan and sales finance balances delinquent two months and greater on a contractual basis increased to 2.89% of total outstandings from 2.56% a year earlier but compared favorably to the 2.95% at March 31 of this year. Examining delinquency of all managed receivables reveals a delinquency percentage of 2.81% at June 30 compared to 2.49% a year earlier and 2.77% at March 31, 1995.
At June 30, the allowance for credit losses was 2.90% of receivables, significantly increased from the 2.69% level both a year earlier and at the end of 1994, although somewhat below the 2.97% at March 31, 1995. Nevertheless, at this level the reserve remains particularly conservative both on an absolute basis and relative to net chargeoffs, covering annualized first-half net chargeoffs 2.0 times. This is one of the most conservative chargeoff coverage ratios in the consumer finance industry.
Beneficial Corporation is a $14 billion, New York Stock Exchange-listed financial services holding company. Subsidiaries of the Company provide financial services through their various consumer finance, banking and insurance operations located throughout the United States, Canada, the United Kingdom and Germany. The Beneficial finance system includes more than 1,000 offices, offering products and services that meet a broad range of consumer credit needs, including credit-related insurance. -0-
Beneficial Corporation Financial Highlights
Three Months Ended June 30 (in millions, except per share amounts) 1995 1994 % Change
Net Income $ 62.8 $ 56.2 12% Earnings Per Common Share $ 1.15 $ 1.05 10% Dividends per Common Share $ .43 $ .38 13%
Six Months Ended June 30 (in millions, except per share amounts) 1995 1994 % Change Net Income $ 83.5 $ 117.1 (29)% Earnings per Common Share $ 1.52 $ 2.18 (30)% Dividends per Common Share $ .86 $ .76 13% Shareholders' Equity $ 1,467.1 $ 1,386.5 6% Finance Receivables Owned $11,995.2 $10,885.9 10% Allowance for Credit Losses as % of Finance Receivables 2.90% 2.69% Return on Average Equity 11.75% 17.33% Return on Average Assets 1.15% 1.79%
CONTACT: Beneficial Corporation
Thomas P. McGough
John R. Engelhardt
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|Date:||Jul 24, 1995|
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