Citicorp adopts incentive plan; credit quality rose in 2d quarter.

NEW YORK -- Citicorp has adopted an unusual compensation plan for some of its top executives, the company disclosed in a regulatory filing this week.

The plan, adopted last month, grants special stock options to senior managers considered "central to the change and turnaround effort" at the company, Citicorp said.

"It's a very unique, very significant program because the options vest purely on stock price," said Ronald I. Mandle, an analyst with Sanford C. Bernstein & Co. in New York. "It also indicates where management thinks the stock price will go in a five-year period."

Striking Prices

The program, which supplements the company's primary stock compensation plan, grants seven million shares to an unspecified number of executives at a price of $31.75. Fifty percent of the shares vest if Citicorp shares trade at $50 for 20 of 30 consecutive trading days within five years, 75% if the stock reaches $55, and 100% if the stock reaches $60. The stock closed at $32.25 on Tuesday, down 25 cents.

"It's gratifying to see a company establish a program that indicates that its interests is in line with the interests of its shareholders," said Diane B. Glossman, an analyst at Salomon Brothers Inc.

Citicorp's stock price would have to improve at a compounded annual rate of 13% to reach $60 in five years, analysts said. The stock market overall typically offers investors compounded annual rate of 9%.

In its quarterly filing with the Securities and Exchange Commission, Citicorp also reported that credit quality continued its slow and steady improvement in the second quarter.

Shrinking Nonperformers

Nonperforming assets equaled 5.97% of total assets on June 30, down from 6.15% three months earlier and 6.49% in the second period one year ago.

The filing contains information about asset quality that was not included in Citicorp's previous announcement that it earned $446 million in the second quarter.

Analysts said they were heartened by the continuing, albeit slow, improvement in Citicorp's credit quality, even though its nonperformers remain high compared with those of its peers.

For example, nonperforming assets at Chemical Banking Corp. amounted to 3.34% of total assets on June 30 and 3.15% at Chase Manhattan Corp.

"Some investors would like to see all the problems over by yesterday, but I'm satisfied with the rate of improvement," said Mr. Mandle. "It's clear that they are on the right track."

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