Conformed
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) January 29, 1996
Beneficial Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-1177 51-0003820
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
301 North Walnut Street, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (302)425-2500
No Change
(Former name or former address, if changed since last report)
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Item 5. Other Events.
The following is the text of a press release of Beneficial
Corporation, a Delaware corporation, issued on January 29, 1996:
- BENEFICIAL CORPORATION REPORTS SLIGHT DECLINE
IN FOURTH-QUARTER NET INCOME -
- Fourth-Quarter Net Earnings Reduced by $30.9 Million,
or $0.58 Per Share, by Charges Related to
German Subsidiary and U.S. Expense Reduction Program -
- Fourth-Quarter Operations Marked by Record Receivables Growth
of Over $1 Billion and Net Interest Margin Approaching 10% -
- Full-Year Net Earnings Decline 15% -
WILMINGTON, Del. -- Beneficial Corporation (NYSE: BNL) today
reported net income of $6.9 million, or $0.10 per share, for the
fourth quarter of 1995, compared to earnings of $9.2 million, or
$0.15 per share, in the fourth quarter of 1994. 1995 results
included $25 million in aftertax charges, or $0.47 per share, for
possible credit losses at BFK Bank AG, Beneficial's German
consumer banking subsidiary, related to the previously disclosed
FUNDUS portfolio and to other commercial loans. During the fourth
quarter of 1994 the Company recorded an initial aftertax
$38 million, or $0.72 per share, charge for the FUNDUS exposure.
1995 results were also reduced by a $9.8 million pretax, or
$5.9 million aftertax charge ($0.11 per share), for employee
severance and other expenses related to U.S. expense reduction
actions. During the fourth quarter, Beneficial's restructuring
effort resulted in a reduction in U.S. employment of 225, chiefly
in headquarters operations.
Before the restructuring and German charges, fourth-quarter
operating earnings per share fell to $0.68 from $0.87 per share a
year earlier, reflecting very heavy up-front loan loss
provisioning on the quarter's record growth of over $1 billion in
owned receivables during the period, which included $700 million
of growth at Beneficial National Bank USA (BNB USA), Beneficial's
private-label credit card bank. Beneficial follows a particularly
conservative loss-reserving methodology for BNB USA, establishing
a 5.25% reserve immediately on all net receivables growth. In
total, Beneficial's loan loss provision during the quarter
increased 71% to $116.8 million from $68.3 million in the fourth
quarter of 1994, as Beneficial added $47.0 million to the balance
of the loan loss reserve.
For the full year, net income fell 15% to $150.5 million from
$177.7 million in 1994, and comparable net income per share
declined 17% to $2.72 from $3.28. In addition to the
fourth-quarter provisions, 1995 profits were also reduced by the
first quarter's $39 million net aftertax ($0.74 per share) special
provision for the Refund Anticipation Loan (RAL) business
resulting from unanticipated changes in IRS tax refund procedures.
Finn M.W. Caspersen, chairman and chief executive officer,
commented, "Without question, 1995 was a very disappointing year
because of the large RAL and Germany losses. However, it is also
clear that beneath our reported results the groundwork was laid
for an outstanding earnings performance in 1996. Before all
special charges in both years, operating earnings from
Beneficial's core consumer finance operations, excluding both RAL
and German results in both years, increased 15%, despite the 36%
increase in the provision for credit losses.
"With full-year managed receivables growth of almost $1.6 billion,
improved operating expense ratios, and a second-half lending
spread in excess of 10%, all coupled with a very conservative loan
loss reserve of over 3% at year-end, we are very well positioned
for an excellent gain in 1996 core operating earnings. These
factors, coupled with the expected return to a profitable RAL
season this year as well, give us great confidence in a strong
earnings rebound in 1996."
Including securitized loans, growth in managed receivables was
also at a record level for the fourth quarter. During the
quarter, managed receivables grew $862 million compared to a gain
of $800 million in the fourth quarter of 1994. Managed
receivables outstanding ended 1995 at $14.5 billion, representing
a 12% or $1.58 billion increase for the full-year, nearly as much
as 1994's $1.7 billion gain. Since 1988 Beneficial has achieved
compound annual growth in managed receivables of 12%.
Fourth-quarter net chargeoffs increased 67% (excluding the FUNDUS
losses in both years) to $69.6 million from $41.6 million a year
earlier. As an annualized percentage of average owned
receivables, net chargeoffs rose to 2.09% from 1.36% a year
earlier and 1.73% in the third quarter of 1995. Higher losses
reflect the expected maturing of the large BNB USA private-label
credit card portfolio, as well as a noticeable increase in net
chargeoffs on the high-yielding unsecured loan portfolio. In
total, unsecured loan portfolios represented 50% of Beneficial's
total outstandings at year-end, up from 43% at the end of 1994.
Despite increased chargeoffs, profitability of unsecured lending
both through the loan offices and at BNB USA remains highly
attractive because of the much higher yields.
For the full year, net chargeoffs increased 41% (excluding the
FUNDUS losses) to $209.4 million from $148.7 million in 1994, and
to 1.64% from 1.28% as a percentage of average receivables owned.
Beneficial's total loan delinquency declined at year-end relative
to the September 30, 1995 level but was moderately higher than the
record low level at year-end 1994. All owned loan and sales
finance balances delinquent two months and greater on a
contractual basis declined to 2.98% from 3.19% at
September 30, 1995, but increased from 2.46% at
December 31, 1994. Examining delinquency of all managed
receivables reveals a similar pattern of 2.97% at year-end, down
from 3.16% at September 30, but up from 2.47% at year-end 1994.
Delinquency levels are well within management's expectations in
light of the loan mix of the portfolio with the growing unsecured
portion.
At December 31, 1995, the allowance for credit losses was
$406.1 million, or 3.03% of outstanding receivables, compared to
$331.6 million, or 2.69% of receivables owned at the end of 1994.
At September 30, 1995, the loss reserve was $359.1 million, or
2.90% of receivables. Accordingly, during the fourth quarter the
reserve balance was increased by $47.0 million, and for the full
year, by $74.5 million. At the year-end level, the reserve
remains particularly conservative, both on this absolute basis and
relative to net chargeoffs, covering 1995 net chargeoffs
1.9 times, one of the most conservative ratios in the consumer
lending industry.
Beneficial Corporation is a $15 billion, New York Stock
Exchange-listed financial services holding company. Subsidiaries
of the Company provide financial services through their various
consumer-finance, credit-card, banking and insurance operations
located throughout the United States, Canada, the United Kingdom,
Ireland, and Germany.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
BENEFICIAL CORPORATION
(Registrant)
By /s/ Samuel F. McMillan
Samuel F. McMillan
Senior Vice President
and Treasurer
Dated: January 29, 1996
