MNC's troubled '90 ended with another record loss

February 02, 1991|By Peter H. Frank

MNC Financial Inc., wrapping up a tumultuous year of new leadership and troubled loans, reported yesterday it lost an additional $198 million for the final three months of 1990.

Despite the loss, MNC -- parent of Maryland National Bank and American Security Bank in Washington -- showed considerable signs of recovery with yesterday's report.

The record quarterly loss, the third in a row for the state's largest banking company, raised the total loss for the year to $440 million as the effects of a fivefold increase in problem real estate loans continued to eat away at MNC's financial results.

Thanks to a recent spate of asset transfers and the sale of subsidiariesby the company, however, MNC had bolstered the company's capital levels to near or above those required by regulators.

Elisabeth Albert Hayes, a banking analyst with Washington-based Johnston, Lemon & Co., said she met yesterday's news with "sort of a sigh of relief. I had braced myself for accepting anything under $400 million as, no, not good, but it's not going to put the bank into any type of jeopardy."

For the three months that ended Dec. 31, MNC said, it lost $197.6 million, or $2.31 a share, in contrast to income of $52.2 million, or 60 cents a share, for the same period the year before.

For all of 1990, the company lost $439.5 million, or $5.23 a share, in contrast to earnings of $245.1 million, or $2.84 a share, in 1989.

Once again, the bulk of the latest quarterly loss stemmed from a large increase in the amount of real estate loans that have either failed or are considered likely to sour.

MNC said its non-performing assets, which consist primarily of loans to the real estate industry, jumped more than 56 percent during the final three months last year. About $1.5 billion, or more than 83 percent, of the total $1.8 billion in troubled assets was related to real estate lending, the company said.

The quarterly increase in troubled loans led the company to pump $257.3 million into its reserves -- and out of earnings -- to protect against further loan losses.

With yesterday's announcement, MNC put the finishing touches on possibly the most difficult year in the regional banking giant's history.

At the beginning of 1990, MNC had slightly more than $300 million in problem loans and foreclosed property on its books. But as real estate loans failed and earnings were eroded into losses, much of the banking company's expansion plans and recent growth evaporated also.

By the end of the year, Alan P. Hoblitzell Jr., the longtime chairman and chief executive of MNC, had ceded power to Alfred Lerner, the company's largest shareholder and former chairman of Equitable.

Maryland National Bank executives were gone, and much of the company had either been sold or was on the block. MNC, whose stock price opened in 1990 at $22.125 a share, ended yesterday before the earnings announcement at $2.625, down 25 cents for the day.

The bright spot in yesterday's news, analysts noted, was in the improved capital positions demonstrated by the company.

After accounting for the sale of its prized credit-card subsidiary, MBNA Corp., to the public last month, MNC said it had about $1.37 billion in stockholders' equity, a key measure of a banking company's ability to withstand losses. Its banking units, which were handed stringent capital targets by federal regulators last year, were either near or above levels that must be met by June 30.

Not including the impact of the credit-card sale, MNC had total assets of $26.4 billion and $16.4 billion in loans at the end of the year.

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