Chase Sees No Surprises, No Dividend Cut in Quarter
Chase Manhattan Corp. has "no plans to cut dividends" and will not have any earnings surprises when it reports third-quarter results in two weeks, chairman Thomas Labrecque said Monday.
He also denied any plans exist for a Chase megamerger but added, "We never say never."
In a press conference during the annual meeting of the American Bankers Association in San Francisco, Mr. Labrecque offered little hope that Chase's real estate problems will ease soon. Chase had $9 billion of commercial real estate loans at the end of the second quarter, with about 25% nonperforming.
Bad Times Still to Come
"It's going to get worse before it gets better," Mr. Labrecque said, echoing a statement last month by Citicorp chairman John S. Reed.
Mr. Labrecque said some New York markets will need five to eight years to recover from overbuilding. The California real estate market has deteriorated since last year, he added, though he claimed Chase's exposure is manageable.
Mr. Labrecque also said his company is not planning another major restructuring. Chase has cut about 5,000 jobs and reorganized its divisional structure in the past year.
Some Analysts Critical
Several analysts expressed surprise at Mr. Labrecque's pessimism on real estate. Some also were critical of the company's decision to tread water on its restructuring efforts.
"He seems to be saying they are going to take a more go-slow approach [instead of] tackling their problems, and doing another restructuring," said Charles Peabody, a bank analyst at Kidder, Peabody & Co.
Mr. Labrecque made his "no surprises" remark in response to a question on whether the bank would raise its loan-loss provision. Last quarter Chase added $265 million to its reserve.
Mr. Peabody, who expects Chase to report operating earnings of 50 cents a share, said the bank's reserve should be $1 billion bigger.
Uncertain Future in Arizona
Analysts are predicting Chase will earn about 63 cents a share in the third quarter, according to a report from Zacks Investment Research. The nation's third-largest bank company, Chase earned 80 cents a share in the second quarter.
Mr. Labrecque said Chase will soon make a decision about whether to sell its troubled bank in Arizona. The company has been on a crusade to shed assets in the past year. Several analysts said they believed Chase has already put the Arizona bank on the block.