Chase to Cut 5,000 Jobs, Post Loss : Finance: Second largest U.S. bank expects $625-million deficit in third quarter. It is setting aside $1 billion to cover loan losses, streamlining.

Troubled Chase Manhattan Corp. announced today the layoff of about 5,000 employees to cut costs and said it expected to post a $625-million loss in the third quarter after setting aside $1 billion to cover loan losses and meet the costs of downscaling the company.

Chase, the second-largest U.S. bank holding company, issued the prediction of heavy quarterly losses just hours after taking the unusual step of publicly denouncing rumors it was in serious trouble as “absolutely false.” It asserted that despite difficulties its capital base was sound.

But the 5,000 layoffs it announced were about 2,000 higher than most analysts had previously estimated. The bank said its “reduction in headcount” would save about $300 million in annual operating costs.

Of the $1 billion set aside, Chase said $650 million would be earmarked to cover possible loan losses and the remaining $350 million would be for reorganization costs.

The $650-million cushion against loan losses reflected the “accelerated deterioration” of the U.S. commercial real estate market and, consequently, Chase’s loan portfolio. This already has led financial rating agencies to downgrade Chase’s credit standing.

Besides the heavy cuts in staffing, the bank said it is “exiting certain underperforming business activities,” signaling a withdrawal from money-losing activities at home and overseas.

“As a result of the above-mentioned items, the corporation expects to report an approximate $625 million after-tax loss for the third quarter of 1990,” the Chase statement said. After these steps, it said, its capital foundation would stand at $11.1 billion, within regulatory requirements.

A lone bright note was the announcement that Chase had a $117 million profit on the sale of a Frankfurt, West Germany office.

Chase said it had already trimmed its staff by about 1,600 employees through a voluntary separation program carried out in August, in which employees with 10 years service were offered incentives to depart. The bank said another 1,800 members of its U.S. staff would lose their jobs by year’s end.

Earlier in the day, Chase moved to dispel “the negative rumors that have been circulating ... that it is having difficulty with its funding or experiencing other liquidity problems,” calling them “absolutely false.” It said the rumors to that effect in recent days were “totally irresponsible.”