U.S. Banks Lose Billions; Foreign Loans Blamed

U.S. banks lost $10.6 billion during the second quarter of 1987 and are headed toward showing the smallest profit since the Great Depression, the Federal Deposit Insurance Corp. said today.

The record loss came because banks set aside an unprecedented $21.2 billion to cover potential losses from loans made primarily to other nations.

Officials said most of the fear over loan losses stems from Brazil, which has not paid any interest on its commercial debts since February.

FDIC Chairman William Seidman said the quarter’s $10.6-billion loss means the banking industry lost $5.3 billion for the first half of the year.

Officials said they expect profits will return beginning this quarter and said the banking industry should finish the year with about $4.5 billion to $7 billion in profits. That would be the smallest increase since 1934.