Stocks Slump Anyway : No Plans to Write Off Loans, Top Banks Say

The nation’s largest banks probably will not follow the lead of Bank of Boston Corp. and write off millions of dollars in loans to Third World countries, bankers and financial analysts said Tuesday.

Citicorp and Chase Manhattan Corp., the nation’s two largest bank holding companies, indicated that they had no plans to write off any loans.

However, Pittsburgh-based Mellon Bank Corp., the nation’s 12th-largest, said Tuesday that it expects to add about $180 million to its loan-loss reserves in the fourth quarter in connection with possible losses on loans to less developed countries. With this addition, Mellon’s net outstanding loans to Third World countries are expected to total $900 million, about 3% of assets, the company said.

But investors seemed to think that the largest banks, too, would take further steps. Bank company stocks fell sharply on Wall Street.

Chase Manhattan stock slumped $2.25 a share to $20.125; Chemical New York Corp., the parent of Chemical Bank, dropped $3.25 to $20.75, and Manufacturers Hanover Co. stock skidded $2.375 to $24.25.

Bank of Boston, the nation’s 13th-largest bank holding company, said Monday that it would write off $200 million in loans to Third World nations as part of a reorganization of its $1-billion loan portfolio to underdeveloped countries.

The company said the move would result in a quarterly loss of between $50 million and $60 million, although the bank said it probably would show a small profit for all of 1987.

Mellon said its addition to reserves would result in a fourth-quarter loss of about $220 million.

Earlier this year, as the financial condition of several Latin American nations worsened, major banks added huge amounts of money to their loan-loss reserves to cover potential bad loans. The first to take the step was Citicorp, which added $3 billion to its reserves.

But Tuesday, the nation’s largest bank company indicated that it had no plans to write off any loans, which is a more drastic step.

“Bank of Boston made a judgmental call on the basis of its own market position and situation,” said Bill Koplowitz, a Citicorp spokesman. “We don’t regard it as a precedent for ourselves.”

At No. 2 Chase Manhattan, which increased its reserves by $1.6 billion during the spring, spokesman Fraser Seitel said Bank of Boston’s move “hasn’t caused us to alter (our) plans.”

Officials at other major banks, including Manufacturers Hanover Trust and BankAmerica Corp., declined to comment.

Wall Street analysts said they did not expect writeoffs by the nation’s largest banks.

“I don’t think that Bank of Boston is a trend-setter, particularly for the money center banks” such as Citicorp, Chase Manhattan and BankAmerica, said Cheryl Swaim, an analyst with Oppenheimer & Co.

However, she said, “the medium-size regionals might decide to do what they (Bank of Boston) have done.”

Asked about Bank of Boston, Cliff Griep, an analyst with Standard & Poor’s Corp., said: “Their action reflected, I think, what they perceived as a deteriorating situation (among Third World countries), but they had the financial strength to add to reserves.”