Citicorp may be down, but the nation's biggest banking company still likes to exercise its influence.
When Citicorp discovered that a leading analysts' group was supporting proposed acccounting rules that it opposes, it went into action.
Last Tuesday, eight influential stock analysts were invited to luncheon of salmon and fresh berries with Thomas E. Jones, Citicorp's top financial officer, and his senior aide, Roger W. Trupin, the company's controller.
The topic: a Financial Accounting Standards Board proposal that would require banks to take discounts on all problem loans, even those on which they expect to recover the entire principal.
While the analysts dined, they heard quiet arguments against the FASB exposure draft, titled "Accounting by Creditors for Impairment of a Loan." The accounting group is holding hearings on the proposal today. If the rules are adopted, they would become effective in early 1994.
Citicorp officials say it was unusual for them to engage in such dining-room lobbying. It believes, though, that endorsement of the proposal by the Association for Investment Management and Research justifies their solicitation of the group's members, mostly securities analysts.
"I'm sure Citicorp was educating us so we could all run and call our Congressman or write to [the Standards Board] or whatever," said an analyst who attended the luncheon.
Problem with Forecasting
One of Citicorp's principal objections to the board's proposal, according to a nine-page letter it filed with the Connecticut-based group, is that it would require banks to forecast future cash flows for interest and principal on troubled loans in order to set a value.
The company says that, in effect, banks are being asked to heavily discount problem loans immediately, even if they stand to recover the full principal amount with reduced interest payments.
Banks now report loans at their historical value and gradually establish reserves or take writeoffs at their own initiative if it looks as if full principal will not be recovered.
Citicorp's Mr. Trupin said adoption of the impaired-loan rules would not immediately have an adverse effect on the bank company's earnings because the bank has already written down many of its problem loans.
But it could hurt in a future recession because banks would have to write down loans earlier.
"This kind of accounting could aggravate" banks' problems, he said.
Citicorp plans to comment at the public hearings on the proposal that are being held today. The board said it had received nearly 150 comment letters on the proposal. Thus far, however, only one analyst, Frank R. DeSantis, Jr. of Donaldson, Lufkin & Jenrette, has written to oppose the plan.
Mr. DeSantis, who attended last Tuesday's meeting, had already sent comments to the board opposing the proposal.
