First Chicago Corp. has sounded fresh warnings about possible further realty loan problems, but officers insist the bank's exposure is small.
In a recent filing with the Securities and Exchange Commission, First Chicago raised the possibility of "upward pressure" on defaults and chargeoffs in its commercial realty portfolio in the second half, citing chronic weakness in the nation's realty markets. The bank regularly issues such forecasts.
The country's 12th-largest banking company last fall segregated more than $2 billion of distressed realty assets into a portfolio marked for accelerated disposition, taking loss provisions of $840 million.
Nonperforming Asset Drop
The cleanup cut First Chicago's nonperforming commercial realty assets to $116 million at yearend 1992 -- down 86% from June 30, 1992. By mid-year 1993, however, the case load had more than doubled to $235 million, or 9.1% of gross commercial realty loans.
John Ballantine, chief credit officer, said First Chicago had built loss reserves to 222% of nonperforming loans, and he indicated that potential loan problems would be handled by drawing down reserves rather than by increasing the loan-loss provision.
Some Mild Disappointment
Though not trivial, the warning about realty-lending troubles in the second half "is in no way a portent of distress at First Chicago," said Mr. Ballantine.
Analysts said they were mildly disappointed but not alarmed, noting the $50 billion-asset bank slashed its commercial realty portfolio by 41%, to $2.5 billion, over the last 12 months.
|Base Is Smaller'
"The base is smaller, and First Chicago hopefully is being conservative in its valuations," said Kenneth Puglisi, a banking analyst with Chicago Corp.
First Chicago's earnings have rebounded in recent quarters, driven by falling provisions and massive trading and equity investment gains. First half earnings of $347.6 million equaled a 1.24% annualized return on assets.