Security Pacific Net Up 19%; Other Banks’ Profits Weak

Los Angeles-based Security Pacific announced record third-quarter earnings Tuesday, an 18.9% increase, while other major banks reported weak results. Chase Manhattan’s earnings were off 7.4%, RepublicBank of Dallas was down 55% and at J. P. Morgan, profits were flat.

Analysts attributed the disappointing overall showing to general weakness in the economy and to the banks’ higher-than-normal additions to loan loss reserves.

“We’re seeing a lot of mixed performances,” said James McDermott of the investment firm Keefe, Bruyette & Woods. “Basically, we were looking for a soft third quarter, and what we’ve seen is in line with expectations.

“The theme that seemed to be continuing is the relatively high provisions for loan losses. Management has done this in some cases to handle a high level of writeoffs, in other cases to beef up reserve accounts” against future anticipated losses, he added.

Non-Interest Income

Security Pacific reported net income of $99.9 million for the three months ending Sept. 30, compared to $84 million a year ago, an 18.9% gain. On a per-share basis, however, profits were up only 9.6%, because the banking company had about 4 million more common shares outstanding.

The bank had profits of $281.3 million for the first nine months of the year, compared to $236.7 million for the same period last year. Much of the company’s earnings have come from sources other than interest on loans, such as securities and foreign exchange trading, loan fees and financial services to companies around the world.

“We are pleased with the very strong growth of non-interest income through the first three quarters of this year,” said Richard J. Flamson III, Security Pacific chairman and chief executive. “That reflects and validates our longstanding strategies of diversification and balance.”

Security Pacific, the nation’s seventh-largest banking company, said it wrote off $77.7 million in bad loans in the third quarter, up from $70.1 million. The reserve for future loan losses increased by $22.5 million to $615.2 million in the period. Non-performing loans and leases totaled $1.209 billion as of Sept. 30, down from $1.243 billion as of June 30 and $1.315 billion as of Sept. 30, 1985.

Higher Operating Expenses

Chase Manhattan, the country’s third-largest bank, said its third-quarter net fell to $138 million, from $149 million a year ago. It attributed the drop to higher operating expenses and to a big increase in its provision for bad loans.

Chase said the decline also was due to $30 million in one-time operating expenses stemming from reductions in the company’s domestic and overseas office network. That helped to offset a $60-million gain from sale of its Computer Power data-processing unit and $8 million from changes in New York state income tax rates.

Chase’s net income for the first nine months totaled $428 million, up 3.4% from the 1985 period.

- RepublicBank, the nation’s 17th-largest bank, reported third-quarter profits of $16 million, less than half the $35.7 million of a year ago. It blamed the decline on continued weakness in the oil industry and the Texas commercial real estate market.

- J. P. Morgan, parent of Morgan Guaranty Trust, the country’s fifth-largest bank, said it earned $211.5 million in the third quarter, up slightly from $209.4 million a year ago. The company said its year-ago earnings were boosted by $39.4 million due to a reduction in income tax expense. For the first nine months, Morgan’s profits were $682.4 million, compared to $531.4 million a year ago. “We’re not disappointed,” a spokesman said.

- First Chicago, the 11th-largest bank holding company, said its third-quarter net was $72.3 million, up from $58 million. Nine-month profits were $199 million, compared to $109.6 million last year. First Chicago said it set aside $155 million for possible future loan losses to cover the risk of its loans in certain developing countries.

- PNC Financial, parent of 30th-ranked Pittsburgh National Bank, reported third-quarter earnings of $57 million, compared to $49.1 million in the period last year.