Citicorp's Mood Rosier, But Problems Persist
In a show of guarded optimism, Citicorp's chief financial officer said Thursday he is more upbeat about the company's loan portfolio than he was six months ago.
"I don't want to say things have peaked yet, but it's positive in that the rate of growth [in nonperforming assets] has come down," said Thomas Jones, Citicorp executive vice president for finance.
Indeed, Citicorp reported that the level of nonperforming assets at its main corporate lending arm rose in the second quarter by only $21 million. This followed three quarterly rises of about $1 billion each at the unit, which is known inside Citicorp as the Japan, Europe, and North America sector.
Another positive signal from a big New York-based lender: Chemical Banking Corp. indicated its U.S. nonperforming loans "will continue to increase over the course of 1991, but at a lower rate than that experienced during the latter half of 1990." The statement was in Chemical's 10Q filing with the Securities and Exchange Commission.
To be sure, the picture isn't entirely rosy. Citicorp's 10Q filing with the SEC this week disclosed that the company's consumer loan delinquencies continued to rise. The overdue loans, which include mortgages, auto loans, and credit car receivables, now total 4.6% of the consumer portfolio, up from 4.2% at the end of March.
Mr. Jones said growth in consumer delinquencies appeared to be slowing late in the second quarter. But he cautioned that they could jump again in the current quarter. He pointed out that consumer delinquencies often lag behind a general economic recovery by some months.
Mr. Jones also said real estate loan quality could continue to deteriorate somewhat in the New York-Washington corridor as well as in California.
He made his remarks at a breakfast meeting with reporters. During the session, he touched on a broad range of topics, including the current bank merger wave. He said Citicorp, which still ranks as the nation's largest bank with $217 billion in assets, felt no pressure to merge with another banks.
|We Already Have Scale'
"We think about mergers all the time, but it's not obvious there's a huge advantage," he said, adding: "We're already bigger than these mergers will get to. We already have scale."
Monday's announced merger of Security Pacific Corp. and BankAmerica Corp. was the third big bank merger to be announced in six weeks. The new BankAmerica is expected to rank as the nation's second largest banking company, with about $190 billion in assets.
Mr. Jones said Citicorp is about half way to its stated goal of cutting $1.5 billion out of annual expenses.
Still, Mr. Jones cautioned that it would be hard to see all $1.5 billion of cost savings on the bottom line, because Citicorp also was generating additional costs and revenues in other areas. He said it has recently opened six new branches overseas, including one in Czechoslovakia.
Mr. Jones said the problem of soured loans to lesser-developed countries was "nearly resolved." He pointed out that Citicorp's loans to Mexico - nearly a third of the company's loans to lesser-developed countries - are now being serviced.
Citicorp's $2 billion exposure to Brazil is also showing signs of improvement, he said, referring to the fact that the Brazilians have begun making some payments lately.
James Rosenberg, an analyst at Shearson, Lehman Brothers, said the bank's outlook for nonperforming assets and consumer deliquencies was in line with his projections.
Mr. Rosenberg said he thought Citicorp would consider merging with another bank and speculated that it would be Chase Manhattan Corp. Mr. Rosenberg said a combination could boost earnings $1.02 a share.
Jed Horowitz and Steve Lipin contributed to this article.
PHOTO : Delinquent Loans On the Rise