Bad Loans May Haunt Citicorp for 5 to 7 Years
Citicorp, the nation’s largest bank, expects to be charging off bad commercial real estate loans for another five to seven years, Chairman John S. Reed said Friday.
Speaking at a luncheon at Chicago’s Executive Club, Reed predicted that commercial real estate values will have fallen by a total of 30% before the market stabilizes.
The crash of commercial real estate prices has led to numerous bank failures throughout the country, especially on the East Coast.
Many insurance companies have seen their claims-paying ratings downgraded as the value of their commercial real estate holdings lost value in recent months.
For the three months ended June 31, Citicorp set aside $1.03 billion as a provision for possible loan losses.
Asked if the reserves and charge-offs would continue at the same pace at Citicorp, Reed said he didn’t expect any changes for the third quarter. Reed would not discuss the bank’s estimated third-quarter earnings. For the second quarter, Citicorp recorded a $43-million profit after taking a special charge of $48 million.
On Friday, Citicorp’s stock slipped 25 cents to $14.50 in New York Stock Exchange trading.