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 28, 1997
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)
Item 5. Other Events.
The following is the text of a press release of Beneficial
Corporation, issued on January 28, 1997:
BENEFICIAL CORPORATION REPORTS HIGHER FOURTH-QUARTER NET INCOME
ALL- TIME RECORD QUARTERLY MANAGED RECEIVABLES GROWTH
OF OVER $1.2 BILLION
- Quarter Net Earnings Rise to $0.40 Per Share,
from Depressed 1995 Level of $.10 Per Share, Despite Burden of
Up-Front Reserve Additions on Huge Receivables Gain -
- Full-Year Net Income Increases 87% to New Record Level of
$281.0 million, as Managed Receivables Increase a Record $2.3 billion -
January 28, 1997
WILMINGTON, Del. -- Beneficial Corporation (NYSE: BNL) today reported net
income of $23.3 million, or $0.40 per share, for the fourth quarter of
1996, compared to earnings of $6.9 million, or $0.10 per share, in the
fourth quarter of 1995. 1995 results were burdened by $25 million in
aftertax charges, or $0.47 per share, for possible credit losses at the
Company's German consumer banking subsidiary, and a $5.9 million aftertax
charge, or $0.11 per share, for employee severance and other expenses
related to an expense-reduction program. Before the restructuring charge
and German credit losses, fourth-quarter operating earnings per share in
1995 were $0.68.
Fourth-quarter 1996 results were reduced by an unusually large up-front
loan loss provision, resulting from higher net chargeoffs and the
quarter's all-time record managed receivables growth of over $1.2
billion, reflecting Beneficial's conservative loan loss reserving
methodology. In total, the loan loss provision for the fourth quarter
increased 34% to $143.1 million from $106.8 million in the fourth quarter
of 1995 (excluding the previously mentioned German charge), as Beneficial
added almost $48 million to the balance of the loan loss reserve during
the fourth quarter.
Fourth-quarter 1996 results were also reduced by more than $13 million in
start-up costs and incremental data processing expenses related mainly to
the private-label credit card relationships with Kmart and PriceCostco.
The quarter benefited from approximately $8 million of additional foreign
tax credit utilization, reflecting a revised methodology for calculating
foreign tax credit limitations, which produced a significantly reduced
effective tax rate for the quarter and the full year. This election
could also provide future benefits by enhancing the Company's ability to
more effectively utilize the foreign tax credits it generates each year.
For the full year, net income increased 87% to a record $281.0 million
from $150.5 million in 1995. Comparable earnings per share also
increased 87% to $5.08 from $2.72 a year earlier. In addition to the
fourth-quarter provisions, 1995 full-year profits were also reduced by a
$38 million net aftertax ($0.71 per share) provision for the Refund
Anticipation Loan (RAL) business resulting from unanticipated changes in
IRS tax refund procedures during the first quarter of that year.
Conversely, 1996 saw a dramatic resurgence in RAL results, including
strong collections on amounts charged off during 1995.
Finn M. W. Caspersen, chairman and chief executive officer, commented,
"1996 was a year of significant improvement for Beneficial. In
particular, we are very pleased to report record earnings for the
year. Moreover, the record level of receivables growth for the full
year, especially the more than $1.2 billion in managed receivables growth
recorded during the recently-concluded fourth quarter, bode well for
strong profitability in 1997. It is noteworthy that fourth-quarter
receivables growth was marked by a resurgence in internally generated
loan growth in the North American loan office system, along with
continued strong growth at Beneficial National Bank USA (BNB USA), our
private-label credit card bank.
"Beneficial's outlook continues to be quite favorable. We expect to
report another record year in 1997 and we are more optimistic than ever
about our longer-term prospects."
For the fourth quarter, managed receivables grew a record $1,228 million,
up from the previous record of $862 million achieved during the fourth
quarter of 1995. Managed receivables outstanding ended 1996 at $16.9
billion, representing a record $2.3 billion, or 16%, increase for the
full year compared to 1995's gain of $1.6 billion, and 1994's previous
record gain of $1.7 billion. Since 1988, Beneficial has achieved
compound growth in managed receivables of over 12% annually.
Owned receivables increased an even more significant $1,490 million for
the fourth quarter, up from a gain of $1,013 million in the fourth
quarter of 1995. For the full year, owned receivables increased a more
modest $1,256 million, reflecting two large securitizations of home
equity loans totaling $1.9 billion during the year.
Fourth-quarter net chargeoffs increased 42% to $98.7 million from $69.6
million in the fourth quarter of 1995. As an annualized percentage of
average owned receivables, net chargeoffs rose to 2.75% from 2.09% a year
earlier. On the basis of managed receivables outstanding, net chargeoffs
rose to 2.37% of receivables from 1.92% in the fourth quarter of 1995.
Higher losses reflect the growing proportion of
unsecured loans in the overall portfolio, as well as the continuing
expected maturing of the large BNB USA private-label credit card
portfolio, and higher net chargeoffs on the high-yielding unsecured loan
portfolio. Beneficial's unsecured loan portfolios have felt the impact
of the significantly higher incidence of consumer bankruptcy in North
America during 1996. In total, unsecured loan portfolios represent 50%
of total managed receivables outstanding at year-end, up from 46% at the
end of 1995.
For the full year, net chargeoffs increased 51% to $316.9 million from
$209.4 million in 1995, and to 2.26% from 1.64% as a percentage of
average receivables owned. On a managed receivables basis, net
chargeoffs for the full year rose to 2.01% from 1.50% in 1995.
Total loan delinquency at year-end was somewhat higher than the year-ago
level, but declined noticeably from the level at September 30, 1996. All
owned loan and sales finance balances delinquent two months and greater
on a contractual basis increased to 3.38% from 2.98% at the end of 1995,
but declined from 4.03% at September 30, 1996. Including securitized
receivables, and examining delinquency of all managed receivables,
reveals a similar pattern of 3.20% at year-end compared to 2.97% a year
earlier and 3.71% at September 30, 1996.
At December 31, 1996, the allowance for credit losses was $498.2 million,
or 3.40% of outstanding receivables, compared to $406.1 million, or 3.03%
of receivables at the end of 1995. At September 30, 1996, the loan loss
reserve was $450.6 million, or 3.42% of receivables. Accordingly, during
the fourth quarter the reserve balance was increased by $47.6 million,
and for the full year by $92.1 million. At the year-end level the
reserve remains conservative, both on an absolute basis and relative to
net chargeoffs, covering 1996 net chargeoffs 1.57 times, a conservative
ratio compared to many others in the consumer lending industry.
Beneficial Corporation is a $17 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.
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 28, 1997
