SAN FRANCISCO (AFX) - UnionBanCal Corp., the parent of Union Bank of California, said Thursday second-quarter profit edged down 2 percent, as loan growth was offset by weak deposit growth.
Quarterly profit was $182.9 million, or $1.26 per share, compared with $187.2 million, or $1.27 per share during the same period last year.
Analysts, on average, predicted a profit of $1.27 per share, according to a Thomson Financial poll.
Net interest income, or earnings from interest on deposits and loans, grew 2 percent to $469 million from $459.7 million last year.
Noninterest income, or earnings from charges and other banking services such as insurance, grew 8 percent to $219.2 million from $203.6 million.
Commercial loans increased 22 percent compared to last year, while residential mortgages grew 14 percent. Average noninterest bearing deposits were flat, while interest-bearing deposits grew 3.8 percent.
Takashi Morimura, president and chief executive, said strong loan growth and credit quality offset deposit pricing pressure stemming from higher short-term interest rates and heightened competition.
The Federal Reserve has increased short-term interest rates 17 consecutive times to 5.25 percent, the highest level since April 2001, while long-term rates have remained fairly stagnant. This narrow gap between short- and long-term interest rates, also known as a flat yield curve, is putting the squeeze on lenders even as new loan development continues to surge.
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