Wells Fargo Profit Soars 52%; Chemical’s Income Falls

Chemical New York Corp., one of the nation’s biggest banking concerns, said Monday its earnings fell 16% in the first quarter, reflecting suspension of interest payments on some of its loans to Brazil and Ecuador.

But another major banking company, San Francisco-based Wells Fargo & Co., said its profit surged 52% from a year ago, despite similar problems with a smaller amount of Third World loans.

New York-based Chemical, the seventh-largest U.S. banking company, reported earnings of $86.2 million in the three months ended March 31 compared to $102.6 million a year earlier.

Chemical announced earlier this month that it was placing $1.04 billion in loans to Brazil on non-accrual status because Brazil was suspending interest payments on debt to foreign banks.

The reclassification reduced Chemical’s net income by $12 million in the first quarter, and will reduce annual profits by about $51 million if interest payments are not resumed by year-end, Chemical said.

For similar reasons, Chemical said it placed $52 million in Ecuadoran loans on non-accrual status, trimming an additional $1.5 million in interest income from the quarter.

A 13.3% rise in expenses for staff and equipment and a bigger loan loss provision also depressed Chemical’s earnings.

Chemical boosted its provision for loan losses to $87.2 million from $83.8 million in the first quarter of 1986. Its loan loss reserve stood at $672.6 million, or 1.74% of loans outstanding, on March 31 compared to 1.50% a year earlier.

Wells Fargo, the nation’s 10th-largest banking concern, said its profit rose to $78.3 million in the three months ended March 31 compared to $51.6 million a year earlier.

The rise in earnings per share was only 20% because Wells Fargo issued stock in connection with its May 30, 1986, acquisition of Crocker National Corp.

Wells Fargo placed $423 million in medium- and long-term Brazilian loans on non-accrual status in the first quarter, reducing its net income by $7 million.

Continued payment deferrals by Brazil would reduce income by about $24 million for the full year, Wells Fargo said.

The company said it placed $59 million in loans to Mexico and $29 million in loans to Ecuador on non-accrual status in the quarter.

Wells Fargo’s net interest income jumped 48% to $480.7 million in the quarter from the same period last year. Loan volume averaged $35.7 billion compared to $24.4 billion a year ago.

Wells Fargo reduced its loan loss provision to $80 million in the quarter from $92.5 million a year earlier. But its loan loss reserve stood at $734.3 million, or 2.05% of loans outstanding, at the end of March versus 1.84% a year earlier.