Flat Security Pacific Results Foreseen
LOS ANGELES - Stock analysts are nervously watching Security Pacific Corp. in the wake of announcements by Wells Fargo & Co. and First Interstate Bancorp that unexpectedly large loan-loss provisions will batter their second-quarter results.
Security Pacific stunned Wall Street in a March announcement that it was slashing its dividend 40% and that nonperforming loans would jump as much as $450 million.
Nonperforming assets, in fact, rose $451 million in the first quarter. The extra loss provisions helped push Security Pacific's first-quarter earnings down to 71 cents per share, from the $1.54 per share earned in the prior year's first quarter.
The consensus on Security Pacific is that the second quarter will be a rerun of the first. For the second quarter, earnings estimates are running about 70 cents to 80 cents per share. Estimates for the year are running from $2.65 per share to as high as $3.75 per share. Although Security Pacific declines to estimate earnings, executives had said previously that earnings of $3.50 per share would match a more pessimistic view than the bank holds.
Some analysts think nonperforming assets could have risen another $450 million in the most recent three months. "That will produce a very weak quarter," said Campbell Chaney, bank analyst at Sutro & Co., San Francisco.
"I am not expecting any surprises, but I would not be shocked to see one," said Robert Albertson, an analyst at Goldman, Sachs & Co., New York.
Analysts are quick to point out that Wells' problems - primarily with highly leveraged transactions - and First Interstate's latest woes - mostly in Oregon and Nevada - do not necessarily having things in common with Security Pacific.
Real Worry on California
Many of Security Pacific's problem assets have come from operations in Australia, the United Kingdom, and Arizona.
Mr. Chaney said the increase in Security Pacific's nonperforming assets would likely reflect some deterioration in the HLT portfolio and in loans in the western states as well as continued problems in Britain.
But the real worry continues to be California real estate and the effect it might have on the earnings of all California's biggest banks.
"Wells' and First Interstate's announcements had very little to do with commercial real estate in California," said Mr. Chaney. "We really haven't seen the effects of this yet."