BankAmerica Corp. on Tuesday reported additional losses in its market-sensitive businesses, in a move aimed at clearing the air before its proposedmerger with NationsBank Corp.
The San Francisco banking giant-which two weeks ago said its trading losses in July and August totaled $220 million-yesterday adjusted that figure to $330 million. The additional losses were in the Latin American and high-yield markets, analysts said.
BankAmerica also said income from equity investing would be down in the third quarter, because of market turbulence this summer, as would earnings from purchasing and carrying securities.
The announcement offered fresh evidence that many large banks would feel the impact of volatile global markets for months to come. But analysts said BankAmerica is disclosing its hits more aggressively than most in preparation for its merger with NationsBank in Charlotte, N.C.
Shareholders of both banking companies are scheduled to vote on the deal on Sept. 24.
"BankAmerica had extra reasons to elaborate on their prior statements, given the shareholder vote," said Michael L. Mayo, an analyst at Credit Suisse First Boston. "We sense the company is taking extra pains to make sure everything is on the table."
Despite a slew of losses, BankAmerica, San Francisco, said it expects to report an after-tax profit, excluding merger related charges, of more than $500 million in the third quarter.
It said its noninterest income from equity investment activities totaled $30 million in July and August, down from $125 million in the second quarter.
In addition, net interest income from purchasing and carrying securities recorded a loss of $12 million in July and August, compared to a gain of $53 million in the second quarter. The decline was due to a profit-sharing relationship with a trading company borrower, a spokesman said.
Seven big banking companies have disclosed trading losses on Russian and other securities. But analysts said they could not predict whether they all would follow BankAmerica and announce additional hits.
"There are a variety of other companies involved in these businesses," said Diane B. Glossman, an analyst at Lehman Brothers Inc. "Nobody else has made further disclosures," she said, adding that the market will have to wait for third-quarter earnings reports to learn which banks "reined in risk."
Meanwhile, other banks are moving to keep investors abreast of their markets exposure. On Monday, Chase Manhattan Corp. held a conference call with analysts to discuss previously stated exposures and losses, a Chase spokesman said.
And BankAmerica's merger partner, NationsBank, told analysts Tuesday that revenues have slowed in its NationsBanc Montgomery Securities investment banking unit.
The combined NationsBank-BankAmerica is likely to see losses in its market-sensitive businesses beyond the third quarter, which it could seek to offset through cost-cutting, said Thomas F. Theurkauf, an analyst at Keefe, Bruyette & Woods.
"If we are in a hunkering down mode, there is a offsetting lever that can pulled, and that is cost savings," Mr. Theurkauf said.
"Some of the bonus accrual will be wound down, so there is some immediate savings. If weakness persisted you could look at head count and staffing levels," he added.
Mr. Theurkauf trimmed his 1999 earnings estimate for the combined bank to $5.25, from $5.60 per share. The analysts' consensus for next year is $5.75, according to First Call Corp., Boston.
Ruchi Madden of PaineWebber Inc. reduced her estimate of per-share earnings in the third quarter for the combined bank to 90 cents, from $1.23, on Tuesday. She predicted in a research note that the new bank will announce higher than expected cost savings next month.
Analysts' consensus third-quarter earnings estimate was $1.13 per share, according to First Call. The figure was $1.26 at the beginning of July.
However, the news did not dampen the long-term view for analyst Joel Silverstein of Prudential Securities Inc., who reiterated his "buy" rating on BankAmerica.
"If this were a were a one-time gain, we wouldn't be putting it into valuation of the stock," Mr. Silverstein said, adding he doubted the losses would hurt "the earning power of the combined institution."
The bank also disclosed a $200 million charge in the third quarter for a writedown of its 18.56% stake in KorAm Bank, a commercial bank in Seoul.
BankAmerica said its $480 million sale of a lending unit, BA Housing Services, to GreenPoint Financial would also go as planned this quarter.
BankAmerica's third-quarter trading losses compare to gains of $251 million for the first quarter, $119 million for the second quarter, and $233 million posted for third quarter 1997.
