Security Pacific Posts Big Loss in Last Report : * Banking: BankAmerica, Great Western and others show gains. However, a Federal Reserve economist says full recovery for the state’s banks is still months away.
Security Pacific Corp., in what is expected to be its last earnings report before it is absorbed by BankAmerica Corp., Thursday posted a surprising $496.3-million loss in the first quarter because of the soft California economy and a lack of tax benefits it normally would enjoy.
Meanwhile, BankAmerica posted a $303-million profit in the first quarter ended March 31, up 7% from a year earlier and stronger than some analysts had expected. The bank cited continued cost controls, along with policies that are keeping a tight rein on problem loans.
Separately, the parent companies of Great Western Bank and World Savings & Loan each reported an increase in first-quarter profits from a year earlier, while City National Corp. in Beverly Hills returned to profitability after suffering real estate-related losses.
The results came as Gary Zimmerman, an economist at the Federal Reserve Bank of San Francisco, predicted that a full recovery for the state’s banks is still months away because of problem loans. In a study released Thursday, Zimmerman noted that lackluster results in California contrast with strong results for banks in many other parts of the West.
Los Angeles-based Security Pacific’s larger-than-expected quarterly loss came on top of a $774.5-million loss in 1991. Over the last six quarters, the bank has posted staggering losses of $1.6 billion. The losses reflect real estate and other loan problems far deeper than anyone had expected when Security Pacific’s troubles first began accelerating in late 1990.
Security Pacific said loans that are past due or in which collection is doubtful rose to $3.5 billion on March 31, up 25% from $2.8 billion at year-end and up 52% from $2.3 billion a year earlier. More than half of the latest increase in problem loans was in California, Chief Financial Officer John F. Kooken said. He said that as much as $100 million of the loss can be attributed to the bank’s inability to take advantage of certain tax benefits it normally would be able to take.
The results partly reflect an extensive cleanup of its loan portfolio before San Francisco-based BankAmerica acquires the bank, a process Security Pacific Chief Executive Robert H. Smith characterized in a recent interview as a thorough “scrubbing.” The merger, expected to be completed next week, will create the nation’s second-biggest bank.
BankAmerica’s first-quarter earnings of $303 million compared to profit of $282 million in the same period a year ago. Net loan losses were $219 million for the first quarter, compared to $447 million a year earlier.
Richard M. Rosenberg, BankAmerica’s chairman, said the good results stemmed from “continuing prudent management of the credit portfolio and success in our expense-control efforts.”
In Beverly Hills, Great Western Financial’s profit rose 18% to $81.6 million. Profits were bolstered by $61 million in tax benefits but were reduced by $30 million as a result of new accounting standards for employee benefits. The bank set aside $29 million for real estate loans that may go sour, a move sparked in part by rising home-loan delinquencies caused by the recession.
World’s parent, Oakland-based Golden West Financial, reported its profit jumped 33% to $70 million as a result of growth in its home-loan portfolio and cheaper costs of money, which widened the spread between what the thrift pays depositors for funds and the interest paid by borrowers.
City National, also based in Beverly Hills, posted a profit of $4.7 million after losses in the second half of last year, but the latest figure was down 6% from the bank’s year-earlier results. As with most California banks, City National has suffered from the soft real estate market.
