B of A Reprots $338 Million Loss to Cover Its Bad Loans

BankAmerica reported today that it lost $338 million in the second quarter, far worse than the break-even results it had predicted just six weeks ago.

The loss was one of the largest ever for a financial company, although it fell short of the $1.16-billion loss that Continental Illinois reported in the second quarter of 1984.

The loss at the nation’s second-largest banking firm contrasted sharply with the healthy profit gains being reported for the second quarter at other banks as the industry has generally benefited from lower interest rates.

Samuel H. Armacost, president and chief executive of the San Francisco-based BankAmerica, said that the company decided to make a larger-than-expected provision for loan losses because of “continuing pressure on a number of our customer segments, particularly the agricultural, shipping, commercial real estate and foreign sectors.”

Pressure Likely to Increase

Analysts said they expect the poor results to increase pressure on BankAmerica to further reduce staff and overhead costs and may lead to calls for changes in top management.

The banking company set aside $892 million for probable loan losses, which it said accounted for nearly 80% of the quarterly loss and “significantly strengthens the bank against credit problems.”

“While the decision to increase the loan-loss provision is painful in terms of short-term results, our management and board believe that bolstering the reserve is a prudent course for the long-range benefit of the corporation,” Armacost said.

The loan-loss provision boosted its loan-loss reserve to $1.5 billion, or 1.81% of total loans and leases, up from 1.2% a year earlier and far above industry averages.

‘Overshadow Progress’

In the second quarter of 1984, BankAmerica posted a profit of $110 million. Its provision for loan losses in that quarter was $206 million.

For the first six months of the year, BankAmerica had a loss of $224 million, contrasted with net income of $211 million in 1984.

“These developments overshadow the progress than BankAmerica has made in improving its revenue generation and reducing ongoing operating expenses and staff levels,” Armacost said.

BankAmerica ranks second to Citicorp, based in New York and the nation’s largest bank-holding company. On Tuesday, Citicorp posted a $251-million profit, a 22% increase over the $206 million it earned a year ago.

Six major banks report gains, Page 1, Part IV.