American Express Co. said Tuesday that it was writing off all of its outstanding Latin American corporate loans under its strategy of withdrawing from that business, and pumping $200 million in capital into its banking unit.
The writeoffs would reduce 1987 earnings by about $146 million, the diversified financial services company said.
American Express said it would take a $350-million charge against its fourth-quarter earnings to account for the addition of $350 million to the loan-loss reserve at its American Express Bank Ltd. unit.
The company also will realize a $204-million net gain from the effect of two new rules mandated by the Financial Accounting Standards Board.
American Express' 1987 earnings already were pressured by earlier charges stemming from additions to the bank's loan-loss reserve, plus a drop in income from Shearson Lehman Bros. Inc., in which it has a 60% stake.
In the first nine months of 1987, the company had a profit of $469 million, compared to an $833-million profit from continuing operations a year earlier.
The 1987 period included a $520-million after-tax charge from a $600-million addition to its loan-loss reserves and a $142-million one-time gain from a public offering of stock in Shearson.
The bank will have a loan-loss reserve of $778 million, about 60% of all non-trade related loans to developing nations, and 14% of all loans after the latest addition. At year-end 1986, the reserve was $192 million.
American Express said it wrote off $80 million in Third World loans in 1987, including about $50 million in private-sector Latin American loans. The writeoffs, loan sales of $550 million, conversion of $160 million of loans in debt-equity swaps and the shrinking market value of the loans combined to reduce the bank's total Third World loan portfolio to $1.5 billion from $2.4 billion.