B of A Reports $518-Million Loss for ‘86; Sale of Assets Allows 4th-Quarter Profit

BankAmerica, closing the books on a turbulent year marked by a hostile takeover fight and a dramatic management change, announced Thursday that it lost $518 million in 1986.

The nation’s second-largest banking company was able to report a profit of $82 million for the year’s final three months because operating losses of about $78 million were more than offset by one-time profits from the sale of an Italian subsidiary.

Bad as the year-end figures are, they represent a small step back from a disastrous first nine months. BankAmerica’s losses through Sept. 30 were $600 million, largely because of high overhead and billions of dollars worth of bad loans in real estate, energy, agriculture and the Third World.

BankAmerica, parent of Bank of America, lost $337 million in 1985.

Clausen Forecast

Chairman A. W. Clausen, who in October was recalled to lead the bank that he headed during its glory years in the 1970s, said Thursday that the bank had contained its problems and would turn a profit in 1987.

“The first three quarters of 1986 are in no way reflective of our prospects today,” Clausen said in a statement. “The fourth quarter signals the beginning of the kind of improvements in our loan portfolio, cost containment, capital enhancement and approach to revenue generation that will return this company to operating profitability in 1987.”

Clausen and the bank must still contend with an unwanted takeover bid from First Interstate Bancorp, a profitable but much smaller Los Angeles bank holding company. First Interstate is seeking regulatory permission to go ahead with a $3.2-billion stock-swap offer for BankAmerica. First Interstate on Wednesday reported record annual profits of $338 million despite fourth-quarter earnings that were virtually unchanged from the same period a year earlier.

‘Turnaround Occurring’

BankAmerica took a $236-million gain from the sale of its Banca d’America e d’Italia subsidiary and an $8-million one-time tax gain, enabling it to report a profit despite operating losses and one-time charges of $46 million for personnel severance costs and $38 million in losses on office space leases.

Frank N. Newman, BankAmerica’s vice chairman and chief financial officer, tried to gloss over BankAmerica’s fourth-quarter operating loss at a press briefing at the bank’s world headquarters here. He pointed instead to “tangible evidence that a turnaround is occurring.”

“Everything is going in the right direction--finally,” he said, citing improved credit quality, lower loan losses, tighter expense control and strengthened capital ratios. “We believe that this is going to be a continuing trend.”

Newman said the company exceeded its staff reduction goal of 5,000 positions in 1986, shedding 6,600 employees. An additional 3,000 employees were cut from BankAmerica’s payroll through the sale of operations.

He said BankAmerica will further reduce its payroll by at least 3,400 in 1987--exclusive of those attributable to asset sales.

BankAmerica’s total assets shrank to $104 billion from $119 billion a year earlier, evidence of the company’s drive to sell off units that are not central to its core business. The company wrote off $371 million in loans in the fourth quarter of 1986, compared to $527 million in the 1985 period. The bank’s loan losses for the year totaled $1.42 billion.

The company’s reserve for future loan losses stood at $2 billion at year-end, compared with $2.18 billion at Dec. 31, 1985.

Bank industry analyst Daniel Williams of Sutro & Co. in San Francisco said BankAmerica’s results mark “the early stages of a long and gradual recovery. It appears there is evidence of improvement now under way.”

John M. Broder reported from Los Angeles and Victor F. Zonana from San Francisco.