Citicorp's consumer loan delinquencies continued to rise in the first quarter, fueled by a pickup in overdue mortgages in the U.S. and Europe.
Consumer loans overdue by 90 days or more jumped to $4.7 billion, or 5.3% of Citicorp's $89.1 billion portfolio at March 31, according to a regulatory filing with the Securities and Exchange Commission. That was the eighth consecutive quarterly increase in the delinquency rate at the nation's biggest banking company, as well as the largest rise in two years.
At the end of the 1991 fourth quarter, 4.8% of the portfolio was delinquent, while a relatively modest 4.2% of credit card, mortgage, and installment loan payments had been late at March 31, 1991.
These stubbornly high consumer loan delinquencies are a disturbing reminder of Citicorp corp's continuing problems with credit quality, despite signs of an economic recovery, according to Diane Glossman, an analyst at Salomon Brothers Inc.
High Cost of Credit Today
"As of right now," she said, "I see no evidence that would lead me to be more bullish on the near-term effect of credit costs at Citicorp."
In addition to the climb in delinquencies, Citicorp said it had stopped accruing interest on its books for $2 billion worth of U.S. mortgages and $1.9 billion of other consumer loans at March 31, up 13% and 7%, respectively from the months earlier.
The bank continues to accrue interest on late credit card loans until they are written off when they become 180 days past due.
Citicorp warned that the trend could continue.
Need for Credit Reserves
"With the U.S. economic environment still uncertain, a further increase in consumer delinquencies, loans on which the accrual of interest is suspended (including U.S. mortgages), credit reserves, and net credit losses could occur," Citicorp said in its 10-Q filing.
Some analysts shrugged off the report, which was filed Friday.
"It's reflecting a trend we know about," said Ronald Mandle, an analyst at Sanford C. Bernstein & Co.
Just as revealing as the delinquency surge, he said, was the fact that losses on Citicorp's credit card portfolio appeared to have declined in April, based on a review of credit card securities issued by the bank. Mr. Mandle predicted that delinquency rates on consumer loans would improve by yearend.
About $600 million of new delinquent loans in the first quarter were mortgages that Citicorp voluntarily absorbed in a move to reduce its interest costs. The company said it was taking advantage of low interest rates, which make it cheaper to fund the new loans at prevailing rates than to pay the required interest to holders of securities backed by the mortgages.
Under recourse provisions related to U.S. mortgage sales, the bank pays principal and interest to a security holder for mortgages in default until completion of foreclosure proceedings.
Bad Mortgage Numbers
Even without the voluntary action, however, Citicorp's mortgage problems appear worrisome.
More than 17,000 loans, or 3.2% of its servicing portfolio, were past due at March 31. That's well above the 1.84% average delinquency rate compiled nationwide by the Mortgage Bankers Association of America at yearend 1991.
Citicorp's $54.6 billion first-mortgage servicing portfolio was scarred with a delinquency rate of 4.4% at the end of the quarter, up from 4.1% three months earlier and 3.3% at March 31, 1991.
'Significant' Problems Abroad
Excluding U.S. mortgages, Citicorp's delinquent consumer loans rose by $100 million in the quarter, to $2.7 billion, or 4.3% of loans other than U.S. mortgages.
The company said in its filing that it experienced "significant increases" in late payments in its United Kingdom mortgage portfolio, as well as in German consumer lending. In addition, Citicorp said, loan volume other than U.S. mortgages declined $1.7 billion from yearend 1991.
In late Tuesday afternoon trading, Citicorp shares were changing hands at $19.125, down 25 cents.
A spokesman for Citicorp declined to comment on the consumer loan delinquencies, beyond citing chairman John Reed's view that real estate problems will continue in 1992.