B of A Has a Record ’91 Profit; Security Pacific Posts a Loss
Security Pacific Corp. said Thursday that it expects to post a $400-million loss for the final quarter of 1991 and a $765-million loss for the year, reflecting continued loan problems for the Los Angeles bank and an extensive financial housecleaning undertaken before its expected acquisition by BankAmerica Corp.
Separately, earnings for BankAmerica, parent of Bank of America, were virtually flat in the fourth quarter, falling slightly to $285 million from $287 million a year earlier. But the San Francisco bank posted a record $1.12-billion profit for the year, up a shade from its 1990 results.
Analysts considered BankAmerica’s profit drop of less than 1% in the quarter a respectable showing given the soft economy. Bank executives, however, acknowledged that its borrowers continue to feel financial pressures.
In addition, several analysts said they believe that the bank was hurt in the quarter by the financial problems of companies formerly headed by the late British media mogul Robert Maxwell. BankAmerica declined to comment on Maxwell.
Analysts had expected a loss at Security Pacific, albeit a smaller one than the Los Angeles bank said it will post when it officially reports year-end results Tuesday. Thursday’s projection for Security Pacific compares to a $357.6-million loss in the fourth quarter of 1990 and a profit of $161.3 million for all of that year.
BankAmerica and Security Pacific, expected to combine this spring pending approval from federal regulators, said their merger plans remain unaffected by the steep loss. Analysts said the bigger-than-expected loss mostly reflects efforts at making sure enough money is set aside to cover Security Pacific’s problem loans before the merger.
“What they are trying to do is clean up their loan portfolio as much as possible,” said Donald K. Crowley, a bank analyst with Keefe, Bruyette & Woods.
On the New York Stock Exchange on Thursday, BankAmerica’s stock fell 12.5 cents a share to $41.375, while Security Pacific’s stock was unchanged at $34.75.
Security Pacific will set aside $730 million--$180 million more than anticipated--for net losses on loans and will devalue by $65 million its investment in the British brokerage Hoare Govett. Security Pacific said the percentage of money that it has set aside to cover losses on loans is 4.3% of its total loans and leases, up from 3.9% Sept. 30. The reserve now totals about 92% of the loans that Security Pacific has earmarked as problems.
Although the steep loss in part reflects Security Pacific’s extensive clean-up job, it also is another indicator of how deep the bank’s problems run. It has been hit hard by problems with a venture into merchant banking, loans made in Australia and Great Britain, problems with corporate acquisitions it financed and the softening real estate market.
Security Pacific’s problems also show the growing troubles of the state’s banks, which have run head-on into an exceptionally soft commercial real estate market. Except for BankAmerica, which has avoided big problems, major California banks have posted large losses or expect to soon.
Further evidence of problems came Thursday when a longtime standout, Beverly Hills-based City National Bank, said its parent lost $23.8 million in the fourth quarter. City National Corp. said its red ink totaled $21.2 million for the year.
Elsewhere, Mellon Bank in Pittsburgh posted a $72-million profit in the fourth quarter, compared to a $99-million loss a year earlier. For the year, Mellon earned $280 million, versus a profit of $174 million a year earlier.
In Chicago, Continental Bank, citing lower expenses and an easing of loan problems, reported a $50-million profit in the fourth quarter, up 43% from a year earlier. For the year, it reported a loss of $76 million.
