Loans to Brazil Depress Net at Citicorp, Hanover

Citicorp, the nation’s biggest banking company, posted a 2% profit decline for the first quarter, while earnings tumbled 20.7% at Manufacturers Hanover Corp. Both companies cited problem loans to Brazil.

Another major banking company, Bankers Trust New York Corp., said its first-quarter profit rose by 7.1% from the same period last year.

Citicorp, which operates Citibank, said its earnings and revenue from its consumer business rose substantially from a year ago. But it said institutional earnings from its dealings with corporations, governments and other financial institutions fell 33% because it placed $3.8 billion in intermediate- and long-term loans to Brazil on a cash basis.

Citicorp said its earnings reflected a $53-million after-tax charge as a result of the Brazilian loan situation. Without the charge, the company said first-quarter income would have risen 17% from a year ago.

By putting the loans on a cash basis, Citicorp records interest payments from Brazil only when they are received rather than as they are due. It had to deduct payments previously recorded under that method.

Brazil announced in February that it was suspending interest payments on medium- and long-term debt to foreign banks.

Citicorp’s first-quarter revenue rose 18% from the like 1986 period. Revenue from fees and commissions, investment security gains and trading results rose, while foreign exchange revenue fell.

Operating expenses were up 27%, reflecting higher costs of expansion and recent consumer banking acquisitions.

Manufacturers Hanover, the nation’s fifth-largest banking company, said it placed $1.55 billion in loans to Brazil and Ecuador on a cash basis. The company said its earnings would have been flat without doing so. Ecuador also suspended interest payments on some of its debt.

Manufacturers Hanover reported strong gains from investment banking and corporate finance activities worldwide, and had sharply higher results from retail banking, including its credit card, branch banking and mortgage origination activities.

Bankers Trust, the nation’s eighth-largest banking company, said its first-quarter profit was reduced by $7.4 million because it placed $540 million in loans to Brazil and $42 million to Ecuador on non-accrual status.

Total cash basis and renegotiated loans were $1.3 billion as of March 31, compared to $729 million a year earlier.

Net interest income was unchanged; other income rose 15% from a year earlier.

Non-interest expenses jumped 18% mainly because of higher employee compensation, the company said.