Reed Reveals Citicorp Still Hard-Pressed
Citicorp chairman John Reed said Friday that the company's earnings will remain under pressure from high chargeoffs and loan-loss reserves.
When asked whether reserves and chargeoffs would remain more than $1 billion in the third quarter, he said, "We will keep on the same pace we've been operating on. You won't see any particular difference in our third quarter."
Gloomy View of Realty
Mr. Reed, who spoke to reporters after a luncheon speech Friday in Chicago, also painted a gloomy picture for U.S. real estate, saying the commercial real estate market nationwide had not bottomed and could depreciate another 30%.
Citicorp's loan-loss provisions and chargeoffs would remain stubbornly high for five to seven years, he said.
Citicorp reported net income of $43 million in the second quarter, with a $1 billion provision for loan losses. It charged off $1.7 billion in loans. The quarter, while weak, was better than analysts had expected. Still, analysts have said they expect Citicorp's second-half performance to be better than its first-half performance.
Worrisome Recovery Pace
In his remarks, Mr. Reed also expressed concern about the pace of the economic recovery and said the restructuring of the banking industry was one reason for subpar economic growth.
He criticized efforts to force banks to mark their assets to market and said it would be the banks, not taxpayers, that bear the burden of recapitalizing the federal deposit insurance fund.
