THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, December 1, 1994 TAG: 9412010466
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Short : 45 lines
Central Fidelity Banks Inc. said Wednesday that its earnings for the quarter ending Dec. 31 will be sharply reduced by losses from selling some of its investment securities.
The Richmond-based parent of Central Fidelity National Bank estimated that these losses will depress its pre-tax income for the fourth quarter by $30 million.
Central Fidelity said it plans to sell $500 million of investment securities having an average maturity of four years and an average yield of 6.06 percent. Like most bond investors, Central Fidelity has been stung by steadily rising interest rates, which have eroded the market value of fixed-income securities.
Although Central Fidelity had expected some increase in interest rates this year, ``We didn't think the Federal Reserve would raise them this far this fast,'' said Charles W. Tysinger, the banking company's treasurer.
About half of the securities that Central Fidelity expects to sell are Treasury securities, Tysinger said.
These sales and other restructuring steps will reduce its 1994 net income by about $19.5 million, or 50 cents a share, the company said.
The price of Central Fidelity's shares declined 1/2 to 26 1/2 Wednesday in relatively heavy trading.
Merrill H. Ross, a banking analyst with the Richmond-based brokerage firm Wheat First Butcher Singer, said Central Fidelity's announcement came as no surprise because other banking companies have disclosed plans to restructure their bond portfolios.
Also, Central Fidelity had been trimming the volume of its investment securities in recent quarters, Ross noted.
In the wake of the company's disclosure about lower earnings, she reduced her estimate of Central Fidelity's per-share earnings for 1994 to $2.30 from $2.95.
For the nine months through Sept. 30, Central Fidelity had reported net income of $86.27 million, or $2.21 per share. by CNB