Citicorp, Irving Bank Corp. and San Francisco-based Wells Fargo & Co. on Tuesday reported that their third-quarter profits fell due to special gains that inflated earnings in the year-ago period.
In contrast, Manufacturers Hanover said proceeds from asset sales boosted its third-quarter profit, while its year-to-year earnings excluding such special items showed a slight decline.
All the banks benefited from a surge in revenue from foreign exchange and other trading activities, but they were hurt by Argentina’s inability to keep current on its bank payments.
Manufacturers Hanover, which has the largest Argentine exposure of any U.S. bank, was the hardest hit. The New York bank, a rumored takeover target, unveiled a poison pill plan on Tuesday.
Citicorp, the largest U.S. banking company, reported a 25% drop in its third-quarter profit to $394 million due to special gains in the corresponding 1987 period. But excluding tax breaks and other special items in both quarters, Citicorp said earnings were up 50%, reflecting higher revenue from trading and tighter control over expenses.
The bank’s expenses totaled $2.2 billion in the third quarter, up only 5% from the year-ago period. Income from individual banking, an area in which Citicorp has said it would like to expand, grew to $172 million in the third quarter from $148 million last year.
Trading profits, most of which were derived from foreign exchange trading, jumped to $169 million in the July-September quarter from $106 million, due in part to the dollar’s summer rally.
Like most other banks, Citicorp was forced to put some of its $1.4-billion Argentine portfolio on a non-accrual basis in the third quarter because the Latin American debtor nation had fallen more than three months behind in its payments. As a result, Citicorp’s third-quarter profit was reduced by $22 million.
Manufacturers Hanover, one of the weaker money-center banks, reported its third-quarter profit climbed to $197.7 million from $129.1 million, but the increase was due to proceeds from asset sales and tax breaks.
Excluding these items, Manufacturers’ earnings declined to $62.8 million from $64.6 million a year ago.
The bank’s profit was reduced by $24.2 million in the July-September period because it placed $580 million, or more than a third of its Argentine loans, on a non-accrual basis.
Wells Fargo in San Francisco reported that its third-quarter income fell to $131.7 million from $155 million a year ago, reflecting a tax benefit it received in 1987 for building up its reserve against risky loans.
Wells Fargo said it continued to sell foreign loans, reducing its portfolio by $752 million in the July-September period to $518 million.
Gain in 1987 Period
The banking company, the nation’s 10th-largest, said the return on its assets came to a sound 1.16% in the third quarter, while the return on its equity was 23.82%.
Irving, which agreed reluctantly to be taken over by Bank of New York Co. earlier this month, said its profit sank to $30.7 million in the third quarter from $95.9 million last year.
It said the decrease was mostly attributable to a $42.4 million after-tax gain in the year-ago period from the settlement of its pension fund obligations.