Chase Says $1.1-Billion Loss Caused by Boosting Reserves

Chase Manhattan Corp., the second-largest U.S. banking company, kicked off the third-quarter earnings reporting period Wednesday by disclosing a $1.1-billion loss, owing to a huge charge for boosting its Third World loan-loss reserves.

However, excluding the special provision, Chase’s earnings were strong, fueled by loan growth and trading income, analysts said.

The loss was attributed to $1.26 billion in after-tax charges for the increased loan-loss reserves.

Without special items and reserve boosts, Chase’s third-quarter 1989 income rose to $151 million, up from $130 million a year ago.

The third-quarter operating profits, Chase said, were helped by increases in net interest income, consumer and investment banking fees and trading account income. Foreign exchange trading income was lower, and expenses were higher.

In the 1988 third quarter it earned $283 million, the bank said.

“Setting aside provisions, the quarter was confirmation of the high quality of Chase’s core earnings,” said Keefe Bruyette & Woods Inc.’s James McDermott. “Net interest income was up and the trading account was up nicely.”

The banking company also took a $126 million pretax charge for Arizona real estate assets, and a $38 million pretax charge to restructure its securities trading business.