4 of nation's largest banks hit by plummeting 1st-quarter profits Citicorp cites increase in bad loans as one reason for decline in profits

April 17, 1991|By New York Times

Four of the nation's 10 largest banking companies have announced substantially lower quarterly profits.

Citicorp, which fell the most, said its profits dropped nearly 70 percent in the first quarter as the weak economy and rising unemployment caused a buildup in delinquent and defaulted loans among consumers. It also cited its already high level of troubled loans for commercial real estate projects.

Citicorp was joined yesterday by Security Pacific, Chemical Banking and Manufacturers Hanover in announcing declines in profits from the quarter a year ago. Although none of the large banks reported big losses or reduced dividends, as they did on occasion in 1990, their profits were below the levels that analysts say are needed for long-term health.

All four reported fewer loans on their books in the first quarter than in the last quarter of 1990.

John S. Reed, Citicorp chairman, said he expected the economy to improve before the end of the year. "But there is little evidence of this now," he said. "Nor is there reason to expect a robust recovery."

While waiting for the economy to improve, banks have reaped only limited benefits from the Federal Reserve's moves to push interest rates lower. Falling interest rates have helped many banks by allowing them to reduce interest rates paid on deposits and borrowed funds faster than they cut rates charged on loans. But the drops have not prevented losses on defaulted or delinquent loans.

Citicorp, the nation's largest issuer of credit cards and home mortgages, said the increase in bad and delinquent loans for individual customers was an important reason why its profit fell 69.7 percent, to $70 million, or 10 cents a share, from $231 million, or 60 cents a share, in 1990s first quarter.

Although Citicorp has not yet published delinquency rates in credit cards and mortgage loans for the first quarter, Thomas Jones, its chief financial officer, noted that last year's trend toward higher delinque-cies had continued.

The economic downturn is also hurting Citicorp's consumer business by reducing the use of credit cards.

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