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) October 27, 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 October 27, 1997:
BENEFICIAL CORPORATION REPORTS RECORD THIRD QUARTER;
PER SHARE EARNINGS INCREASE 15 PERCENT TO $1.40
Company Undertakes New Initiatives to Enhance Shareholder Value
Three Million Share Stock Repurchase Program Approved
WILMINGTON, Del. -- Beneficial Corporation (NYSE: BNL) today reported
record earnings for the third quarter of 1997. Third quarter net
income rose to $77.5 million, up 14% from earnings of $67.9 million in
the third quarter of 1996. Comparable earnings per share increased 15%
to $1.40 from $1.22 in the 1996 period. These are the highest
third-quarter earnings in the Company's history. Results were marked
by wider lending spreads, improved operating efficiency, and strong
growth in insurance earnings.
The Company also announced a number of initiatives to enhance earnings
growth and build shareholder value.
"While we are pleased with our strong earnings, we are very much
focused on strengthening Beneficial's position so that over the
long-term it continues to build and deliver value for all our
shareholders," said Finn M.W. Caspersen, chairman and chief executive
officer. "We have recently completed a strategic review and concluded
that we can enhance the return to our shareholders by focusing on those
businesses with the highest potential returns and growth. Our core
U.S. consumer financial services businesses -- including consumer
finance, related credit insurance, private-label credit card, and tax
refund lending, as well as our highly profitable United Kingdom and
Irish operations -- offer solid growth opportunities and merit our
undistracted commitment of energy and resources.
"Therefore, we are taking several steps, including the sale of our
Canadian and German consumer finance subsidiaries, and the divestiture
of certain real estate holdings in Peapack, New Jersey, and in Tampa,
Florida, in order to sharpen our strategic focus. We will utilize the
proceeds from these sales to repurchase stock and reinvest in our core
businesses, especially in enhancing their technological capabilities."
The board of directors of the Company has authorized the repurchase up
to 3.0 million shares of common stock (approximately 5.5% of
outstandings) from time-to-time in open market or through privately
negotiated transactions.
"We already have sold significant parcels of residential real estate on
Harbour Island, our Tampa, Florida, real estate investment, and are
currently negotiating sales for amounts at or above book value for all
of the remaining residential real estate. In addition, we are in
active discussions for sale of a large parcel of land adjoining our
administrative office complex in Peapack, New Jersey," Mr. Caspersen
said.
The Company has retained Goldman, Sachs & Co. to act as financial
advisor in connection with the divestiture of its Canadian and German
subsidiaries. As stated in U.S. dollars, Beneficial Canada had
receivables of $763 million and shareholders equity of $135 million at
September 30, 1997, and had net earnings of $12.2 million during the
twelve months ended September 30, 1997. The Company's German
subsidiary had receivables of $365 million, and equity of $25 million
at September 30.
"We also recognize that, while managed receivables have continued to
increase, their growth is not meeting our goal and is not likely to in
1998, short of new actions on our part," Mr. Caspersen continued.
"Therefore, we are taking strong action to fundamentally re-engineer
our loan office system. The steps we are undertaking are expected to
enhance receivables growth and reduce costs significantly. These
initiatives will have costs associated with their implementation which
are likely to affect earnings in the short-term, while leading to
significantly improved long-term earnings performance."
Specifically, Mr. Caspersen said, major re-engineering improvements,
including new technology for the loan office system, are planned.
These enhancements should significantly improve overall systems
performance, providing more responsive technology for the loan office
staff and freeing them up to do more pure selling of new loan
products. Included in the new capability would be improved loan
origination, collection, and marketing and solicitation, with
significantly enhanced credit decisioning for the individual loan
offices. These changes will take advantage of specialized support for
the loan office collections.
"These changes, when fully implemented, should substantially increase
the efficiency of Beneficial's U.S. loan office system, enhancing loan
growth by focusing on a three- to four-fold increase in marketing of
loan products through existing personnel resources," Mr. Caspersen
said. "While this re-engineering represents a major shift for
Beneficial, it also represents a reaffirmation of our long-held core
doctrine of first-class customer service."
Beneficial's nine-month earnings were also at a record level of
$266.5 million, up from $257.7 million in the 1996 period. Comparable
nine-month earnings per share increased to $4.81 from $4.68 in 1996.
Nine-month return on equity on an annualized basis was a strong 20.3%,
down modestly from 21.5% in the 1996 period, which enjoyed particularly
strong tax refund anticipation loan (RAL) profits. Similarly, return
on assets was a healthy 2.09%, down only slightly from 2.16% in the
1996 period.
Total managed receivables increased $175 million during the third
quarter, before the impact of foreign exchange translation, down from
an increase of $444 million in the year-ago period, reflecting an
adverse comparison at Beneficial National Bank USA (BNB USA).
Receivables growth was stronger in the U.S. loan office system, as
managed receivables expanded $96 million, compared to a gain of
$66 million in the third quarter of 1996. Reflecting the anticipated
paydown of certain maturing same-as-cash tranches at BNB USA, BNB USA's
receivables declined $64 million during the quarter, compared with a
gain of $315 million a year earlier, when those tranches were rapidly
increasing.
Total managed receivables at September 30 were $17,200 million, up 10%
from $15,633 million at September 30, 1996. For the first nine months,
total managed receivables, before foreign exchange translation,
increased $470 million, compared to a gain of $1,120 million in the
comparable 1996 period. Growth in United States loan office managed
receivables was increased at $491 million for the nine months, up from
$404 million during the first nine months of 1996.
Reflecting the anticipated maturing of the private-label credit card
portfolio, net chargeoffs increased during the third quarter. Total
third-quarter net chargeoffs increased to $106.2 million, up from
$80.9 million in the third quarter of 1996. As a percentage of average
owned receivables, third-quarter net chargeoffs increased to 2.92% of
the portfolio on an annualized basis from 2.34% a year earlier, and
2.61% in the second quarter of 1997.
On a managed basis, third-quarter net chargeoffs increased to 2.50% of
average managed receivables, up from 2.04% on the same basis a year
earlier and 2.26% in the second quarter of this year.
For the first nine months, net chargeoffs increased to $294.7 million
from $218.2 million in the 1996 period, while the net chargeoff
percentage of average owned receivables rose to 2.69% from 2.10% in
1996. On a managed basis, the nine-month net chargeoff ratio rose to
2.33% from 1.88% in 1996.
All owned receivables delinquent two months and greater on a
contractual basis increased modestly to 4.24% from 4.03% a year earlier
and 3.89% at June 30, 1997. On a managed receivables basis, overall
delinquency increased to 3.94% from 3.71% a year earlier and 3.68% at
June 30 of this year.
At September 30, the reserve for credit losses was 3.69% of
receivables, increased from 3.47% at June 30 of this year, and 3.42% at
September 30, 1996. During the third quarter, $19.8 million was added
to the balance of the loss reserve, increasing the reserve to $525.2
million from $505.4 million at June 30, and $450.6 million at September
30 of last year. At the current level, the reserve covers annualized
nine-month net chargeoffs 1.34 times, a conservative ratio by industry
standards.
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: October 27, 1997
