Three big banks on Tuesday put some dents in the upbeat earnings picture that has been emerging for the third quarter.

Citicorp and Chemical Banking Corp. reported healthy gains, but both indicated continuing problems with bad loans.

On the West Coast, Wells Fargo & Co. weighed in with humbling earnings of $24 million, below analysts' expectations. Its loan-loss provision of $400 million was up 33% from the second-quarter level and twice as high as in the third quarter a year earlier.

Separately, five Pennsylvania-based banks and one in the Midwest weighed in with strong earnings Like many other large regional banks, they reported wide interest margins and steady improvement in credit quality.

Citicorp's profits of $116 million bettered estimates that the bank made just two weeks ago. The nation's biggest bank reported strong foreign exchange revenues and improvements in commercial real estate.

However. Citicorp wrote off $860 million of consumer loans. In the last two quarters, consumer writeoffs - primarily in the United States, totaled $1.7 billion.

Chemical, the nation's third-biggest bank company, cited hefty foreign exchange gains, increases in net interest revenues, and strong fee income in reporting a profit of $282 million, well above expectations. But its nonperforming loans outside of restructuring countries grew by $164 million, while expenses related to foreclosed real estate also continued to rise.

In late trading on Tuesday, shares of Citicorp were changing hands at $15.125, up 25 cents. Chemical, which rose strongly Monday. was unchanged at $33.50 per share. Wells fell 37.5 cents, to $64.125 per share.


The New York company's $116 million gain was a dramatic turnaround from its $885 million loss of one year ago. It also exceeded the $80 million to $100 million of profits that the bank predicted two weeks ago.

A bank spokesman said a variety of businesses wound up producing slightly stronger results than expected.

Foreign-exchange trading was an outsize contributor. Currency revenues soared to $364 million from $256 million in the second quarter, buoyed by the quarter's turbulence in European currencies. But other trading account revenue fell to $87 million, from $121 million in the preceding three months.

Citicorp said it continued to make headway on expenses, as measured by its "key management measure" of "operating margin." The calculation - which subtracts revenues from expenses but excludes credit costs - came out to $1.9 billion, compared with $1.7 billion in the second quarter. The margin is above the goal Citicorp had expected to reach in 1993.

But the heavy consumer writeoffs and a $40-million after-tax restructuring charge in the consumer division continues to plague the company. Citicorp said some of the problems relate to losses from securitized credit-card receivables.

The company added $113 million to its loan loss reserves after total writeoffs of $839 million. Its reserve as a percentage of total loans rose to 2.49% from 2.42% at the end of the second quarter.

Some analysts said they were cheered by the absence of big surprises or one-time events in the results and the relative stability of asset quality. Unlike the situation in the first and second quarters, Citicorp reported no material gains from asset sales in the July-September period.

The bank's capital ratios were unchanged during the quarter. Citicorp's Tier 1 equity capital is now 4.25% of its risk-weighted assets, and its total risk-based capital ratio is 8.5%.


The New York-based giant, which merged with Manufacturers Hanover Corp. in December, reported profits 35% higher than in the previous year's consolidated third quarter. Its earnings of 98 cents per share exceeded the consensus 86 cents, according to Zacks Investment Research.

Though noninterest expenses rose - reflecting $92 million of foreclosed-property expense and a $30 million charge relating to its Canary Wharf lease arrangements in London - Chemical said that merger-related expense savings of about $75 million are ahead of schedule.

"It looks like they're on track with the expense savings and the asset quality looks solid," said Phillip Carter, an analyst at First Boston Corp.

Credit problems, however, continued to trouble the company. Chemical put $164 million of loans on nonperforming status during the quarter, mostly related to commercial real estate. Its nonperforming assets grew slightly, to $6.58 billion.

Chemical's added $330 million to its loan-loss provision, down $15 million. The bank's reserve of $3.1 billion fell to 3.8% of total loans, from 4.4% one year earlier.

Analysts, who said Chemical prepared them for the loan problems, predicted that credit issues would cut into results for several more quarters.

"Nonperformers were basically stable, which is what they were telling people," said Mr. kSoifer of Brown Brothers Hariman & Co. "I don't expect them to go down any time soon."

Like many of its peers, Chemical continued to benefit from low interest rates. Net interest income rose 15% over the level in the year-earlier quarter, to $1.16 billion, with the yield on interest-earning assets rising to 3.84% from 3.27%.

The company also benefited from the quarter's volatile foreign exchange markets although it stumbled in trading of debt. Currency trading gains jumped 140%, to $176 million. But revenues from trading securities took a 200% nose dive to $50 million. Chemical attributed the decline to the effects of currency fluctuations on its European government securities and LDC debt-trading portfolios.

The bank, which ranks first in loan syndications, reported fees of $271 million, up 9%. Its corporate finance and loan sale fees of $73 million were about even with those of the third quarter of 1991.

Chemical's merger-related expense savings totaled $190 million for the first nine months of this year. The bank said most of the savings came from reductions in employees. Total staff at Sept. 30 was 39,588, down 9% since the beginning of the year.


Wells' feeble earnings stemmed from deepening credit woes, especially problems with Southern California commercial real estate loans.

Chargeoffs were $264 million, or 2.66% of average loans, its highest level since California's economy started deteriorating. Writeoffs included some $96 million in commercial and credit card loans.

On the positive side, total nonperforming assets grew a modest 1.2% during the quarter to, $2.99 billion. Nonperforming loans and foreclosed property represented 5.7% of total assets at the end of the quarter.

Net interest income rose to $670 million. up 5.2% over the third quarter a year ago. The increase resulted from a net interest margin of 5.69%, compared with 5.22% a year ago. The third-quarter margin was identical to that reported in the 1992 second quarter.

"Basic earnings power held up well," said James M. Rosenberg, analyst with Lehman Brothers. "Wells has enough earnings power to sustain it through a difficult credit period."

Wells' results were bolstered by a one-time $45 million gain on the sale of mortgage-backed securities. Partially offsetting that were $16 million in losses on real estate investments.

For the year to date, Wells reported net income of $225 million, down 10.7% from profits in the first nine months of 1991.CiticorpNew York, N.Y.Dollar amounts millions (except per share)Third Quarters 3Q92 3Q91Net income $116.0 ($885.0)Per share 0.17 (2.72)ROA 0.20% (1.58%)ROE 3.20% (45.1%)Net interest margin 3.82% 3.89%Net interest income 1,953.0 1,924.0Noninterest income 1,857.0 1,766.0Noninterest expense 2,517.0 3,374.0Loss provision 927.0 896.0Net chargeoffs 839.0 1,644.0Year to Date 1992 1991Net income $442.0 (324.0)Per share 0.78 (1.36)ROA 0.26% (0.20%)ROE 5.00% (7.40%)Net interest margin 3.76% 3.77%Net interest income 5,611.0 5,521.0Noninterest income 6,017.0 5,423.0Noninterest expense 7,504.0 8,442.0Loss provision 3,166.0 2,737.0Net chargeoffs 2,798.0 3,972.0Balance Sheet 9/30/92 9/30/91Assets $222,882 $224,060Deposits 151,770.0 145,724.0Loans 147,945.0 152,021.0Reserve/nonp. loans NA 28.2%Nonperf. loans/loans NA 7.3%Nonperf. asset/asset NA 6.1%Leverage cap. ratio NA 4.0%Tier 1 cap. ratio 4.25% 3.67%Tier 1+2 cap. ratio 8.50% 7.34%Chemical Backing Corp.New YorkDollar amounts in millions (except per share)Third Quarter 3Q92 3Q91Net income $282.0 $209.0Per share 0.98 0.95ROA 0.80% 0.60%ROE 12.49% 11.08%Net interest margin 3.84% 3.27%Net interest income 1,158.0 1,003.0Noninterest income 775.0 768.0Noninterest expense 1,266.0 1,181.0Loss provision 330.0 313.0Net chargeoffs 436.0 354.0Year to Date 1992 1991Net income $782.0 $574.0Per share 2.81 2.62ROA 0.75% 0.54%ROE 12.03% 10.46%Net interest margin 3.75% 3.16%Net interest income 3,372.0 2,908.0Noninterest income 2,329.0 2,178.0Noninterest expense 3.656.0 3,534.0Loss provision 1,050.0 895.0Net chargeoffs 1,210.0 1,435.0Balance Sheet 9/30/92 9/30/91Assets $138.833 $142,449Deposits 89,759 91,963Loans 82,078 84,059Reserve/nonp. loans 61.47% 60.10%Nonperf. loans/loans 6.17% 6.34%Nonperf. asset/asset 4.74% 4.68%Leverage cap ratio 6.50% 5.00%Tier 1 cap ratio 7.00% 5.60%Tier 1+2 cap ratio 11.20% 9.70%Wells Fargo & Co.San FranciscoDollar amounts in millions (except per share)Third Quarter 3Q92 3Q91Net income $24.0 $86.0Per share 0.21 1.59ROA 0.18% 0.62%ROE 1.50% 10.62%Net interest margin 5.69% 5.22%Net interest income 670.0 637.0Noninterest income 285.0 224.0Noninterest expense 508.0 503.0Loss provision 400.0 200.0Net chargeoffs 264.0 123.0Year to Date 1992 1991Net income $225.0 $252.0Per share 3.62 4.65ROA 0.57% 0.61%ROE 8.66% 10.51%Net interest margin 5.69% 5.16%Net interest income 2,021.0 1,904.0Noninterest income 801.0 638.0Noninterest expense 1.508.0 1,448.0Loss provision 915.0 635.0Net chargeoffs 598.0 373.0Balance Sheet 9/30/92 9/30/91Assets $52,278.0 $55,774.0Deposits 42,156.0 43,918.0Loans 38,810.0 46,005.0Reserve/nonp. loans 82% 63%Nonperf. loans/loans 6.2% 3.9%Nonperf. assets/assets 5.7% 4.1%Leverage cap. ratio 6.05% 5.03%Tier 1 cap ratio 7.40% 5.47%Tier 1 + 2 cap ratio 12.25% 9.79%

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