Wild market swings abroad and at home will cost BankAmerica Corp. at least $122 million more than expected this quarter, although the West Coast's largest bank said it still expects a profit.
Securities trading losses have added another $110 million to the bank's $220 million in previously announced Russian losses, the bank said Tuesday. Sources said the new losses were incurred in Asia and Latin America.
In addition, a profit-sharing deal with an unnamed domestic securities trader resulted in a $12-million loss.
The bank also said income from stock investments declined sharply in July and August--to $30 million from $125 million in the second quarter--as U.S. markets fell.
Still, BankAmerica said it expects a $500-million after-tax profit for the third quarter, excluding charges related to its merger with NationsBank Corp., set to close Sept. 30.
The bank's profit in third-quarter 1997 was $819 million.
"To put it in perspective, [the loss] is about five weeks' worth of earnings," said Bert Ely, a bank analyst in Arlington, Va.
Analysts were divided about whether other major banks also would increase their trading loss estimates to reflect continuing financial market woes in Russia and Asia as well as recent dramatic market drops in Brazil and Mexico.
Banks and brokers can incur losses in volatile markets either in trading for their own accounts or by holding securities in order to act as a "market maker" for clients.
Citicorp, Chase Manhattan Corp., Bankers Trust Corp. and J.P. Morgan & Co. previously announced losses related to Russia and other markets.
Among other firms, Travelers Group unit Salomon Smith Barney said it lost $360 million in July and August trading in U.S. and foreign markets.
Trading losses could widen further if Latin American markets--which rallied sharply Tuesday--continue to be volatile, analysts said.
Still, the losses so far aren't likely to derail any of the big financial mergers announced this year, said Tom Burnett, director of Merger Insight.
"They [BankAmerica and NationsBank] have more than one or two months' worth of trading on their minds," Burnett said.
Even so, BankAmerica stock fell $1 to close at $62.81 on Tuesday, and NationsBank fell 19 cents to $56.81, both on the New York Stock Exchange.