Bank of California Profits Off 26% In 2d Quarter Because of Tax Hit

SAN FRANCISCO - The Bank of California, in one of its last earnings reports before combining with Union Bank, posted a 26% decline in after-tax net income for the quarter ended June 30.

But most of the decline is attributable to an increase in taxes from last year. Before taxes, second-quarter net income rose 10%, to $41.5 million.

The bank, which is owned by Japan's Mitsubishi Bank Ltd., ranks as the sixth-largest in California. It posted second-quarter net income after taxes of $27.2 million.

A senior Bank of California official said 1994 taxes were unusually low because of tax-loss benefits that were carried forward from loan losses incurred in the early 1990s.

Like other banks in California, Bank of California suffered heavy losses on real estate and construction loans during the real estate crash of the early 1990s.

Since then, Bank of California, which emphasizes business banking, international correspondent, and personal trust services, has basically stopped real estate lending and worked out most of its problem loans.

Bank of California's results for the second quarter show a steady improvement from 1991, when it lost $188 million. Net interest income rose 16%, to $78 million. Net loans rose 1%, to $5.5 billion. Total assets rose 2%, to $7.8 billion. Noninterest income rose 11%, to $37.4 million, pushed primarily by increases in international business services.

The Bank of California official, echoing other sources close to the situation, said detailed plans have not yet been prepared by officials in California for the merger with Union Bank. Union Bank, controlled by Bank of Tokyo, is the fourth-largest commercial bank in California.

The two California banks are combining as a result of a merger agreement between their parent banks. Together, Bank of Tokyo and Mitsubishi Bank will create the world's largest bank.

For the California merger, the only details disclosed so far include: the target date for completion is April 1; the name of the merged entity will be Union Bank of California; and Union Bank president and chief executive Kanetaka Yoshida will retain those titles in the new institution.

Bank of California president and chief executive Hiroo Nozawa will be deputy chairman and chief operating officer.

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