Fees for investment banking advice on its deal to sell itself to the credit card giant Capital One Financial Corp. contributed to Hibernia Corp.'s failure to meet first-quarter earnings estimates.
The New Orleans banking company said Thursday that it paid investment bankers $5 million, or 2 cents a share, for advice on the $5.3 billion cash-and-stock deal, announced last month, with Capital One, of McLean, Va.
Analysts said the fees, which Hibernia paid to J.P. Morgan Securities Inc. and Bear Stearns Cos., were typical of the fees for recent mergers and acquisitions.
Earnings per share rose 29% from a year earlier and 10% from the fourth quarter, to 54 cents. But operating earnings of 48 cents a share, excluding merger expenses and other one-time items, were a penny short of the average estimate of analysts surveyed by Thomson First Call.
Hibernia reported a pair of one-time gains that added 8 cents a share to earnings: $14 million from the sale of an energy asset and $3.9 million from Discover Financial Services' January acquisition of Pulse EFT Association, a PIN debit network in which Hibernia held an ownership stake.
It had told investors in January to expect the gains.
Hibernia said its first-quarter profits rose 30% from a year earlier, to $85.8 million, partly because of the May 2004 acquisition of Coastal Bancorp Inc. of Houston.
The $22 billion-asset company said that loan growth was flat and that commercial loan balances actually fell 2% from the fourth quarter. But analysts said fee income was strong and the net interest margin was stable.
Hibernia, the largest banking company in Louisiana has been expanding rapidly in Texas. It expects to complete its deal with Capital One in the third quarter.
J. Herbert Boydstun, the chief executive who has led a turnaround at Hibernia over the past few years, called it "another solid quarter" in a call with analysts Thursday. He also said the Texas expansion "has exceeded our initial expectations" and would continue after Hibernia becomes part of Capital One.
Hibernia opened five branches in the Dallas-Fort Worth and Houston markets during the first quarter, he said. "For the full year, we continue to expect to open approximately 20 new branches in Texas, as Hibernia and as a subsidiary of Capital One."
Analysts said Hibernia's quarterly results are less important to investors because of the deal with Capital One.
"I don't think people are going to focus too much on the quarter-to-quarter trends here," Kevin Fitzsimmons of Sandler O'Neill & Partners LP said in an interview. "They know … the company's getting acquired."
There was nothing in Thursday's report to raise concerns about Hibernia's prospects, he said. "I don't see any red flags."
Jeff Davis, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp. in Nashville, said Hibernia would proceed cautiously until the deal closes.
"My guess is it will be run to produce no surprises this quarter and next," Mr. Davis said.
