CalFed Posts Loss of $92 Million in Third Quarter
CalFed Inc., citing a drying up of sales in tract-home developments it owns, disclosed Thursday that it lost $92.3 million in the third quarter. The Los Angeles-based thrift, the nation’s third largest, also slashed its quarterly dividend by more than 90%, to 3 cents a share.
Separately, BankAmerica Corp., citing cost controls and continuing profits from its consumer banking operations and other businesses, posted an 11% boost in third-quarter earnings.
CalFed, parent of California Federal Bank, is the latest in a string of financial institutions reporting losses or significant profit drops this week stemming from problems in real estate. CalFed’s loss compared to earnings of $22.2 million in the year-ago quarter.
CalFed set aside $96 million in the quarter to cover possible real estate losses, and showed a $42.8-million loss on the sale of its Beneficial Standard Life Insurance Co. unit. It took the action on the real estate because the value of residential and office property it owns in California has declined. Also, CalFed is trying to speed up the sale of its real estate operations because last year’s thrift bailout law discourages S&Ls; from investing in such assets.
CalFed said sales of homes in its developments have virtually ground to a halt as a result of the uncertainty caused by Iraq’s invasion of Kuwait in August, and that it is offering buyers big concessions. CalFed said 221 homes in its developments were sold between January and August. None have sold since August, spokesman James F. Hurley said.
CalFed’s stock now sells at $4.375 a share, a huge discount to its book value (net worth) of $28.85 a share. Chief Executive Jerry St. Dennis said the stock price reflects investor nervousness about potential real estate problems at CalFed and other institutions.
Jonathan E. Gray, a thrift analyst with the Wall Street firm Sanford C. Bernstein & Co., said Calfed is making the right step by selling its real estate investments. But Gray doubted that the Iraqi invasion can be blamed for hurting CalFed’s real estate operations, which he characterized as lackluster even during the California real estate boom of the 1980s.
“To blame it on Saddam Hussein is a bit much to believe,” Gray said.
BankAmerica’s $283-million profit, up from $254 million a year earlier, is likely to be the largest earnings amount posted by any U.S. bank in the latest quarter. Ironically, the near-failure in the 1980s of the San Francisco-based parent of Bank of America is often cited as one reason why it is avoiding problems now. Its troubles then prevented it from making many of the real estate loans that now haunt many banks.
