GlenFed Expects More Outsize Loss Reserves
LOS ANGELES -- GlenFed Inc. will continue to make larger-than-normal additions to its loan-loss reserve as long as the economy remains weak, the company's president and chief operating officer, Stephen Trafton, told analysts this week.
GlenFed made a loss provision of $55.2 million in its first fiscal quarter, which ended Sept. 30, compared with $14.3 million a year earlier.
Balance Sheet Restructuring
"An ordinary reserve add would be about $20 million per quarter," said Mr. Trafton, who recently added the president and chief operating officer functions to those of chief financial officer. Larger provisions might be needed for purposes of balance sheet restructuring, he said.
GlenFed has $21 billion in assets and is the parent of Glendale Federal Bank, the fourth-largest thrift in California and the nation. Assets fell $3.6 billion in the 12 months ended Sept. 30.
The company earned $17.1 million, or 50 cents a share, in the fiscal 1992 first quarter, compared with $18 million, or 53 cents, a year ago.
Mr. Trafton said that, while earnings were flat, they also reflected significant changes resulting from a strategic plan introduced to cut costs aggressively and raise capital.
Net interest in the fiscal first quarter was $130.2 million, compared with $113 million in the fiscal 1991 period.
Mr. Trafton said "a similar pattern" of net interest income was developing in the current quarter.
GlenFed chairman Norman Coulson told analysts the outlook is clouded by what further capital requirements regulators may impose on savings and loans and by the weak economy.
"Nationally, the real estate market appears to be bottoming, but it is unlikely there will be any major improvement until the middle of 1992," he said. "California will continue to deteriorate for another few months."
GlenFed has operations in California, Washington, and Florida. Its nonperforming loans of $443.3 million at Sept. 30 totaled 66% more than the $266.8 million a year earlier.
Mr. Trafton said commercial and industrial loans accounted for a sizable part of the total, though the company has ceased writing those loans. It focuses on single-family mortgages.
"Commercial and industrial will be an area of pressure because of the economy," he said. He added that GlenFed is not exposed to any huge single property but rather to a number of smaller ones.
PHOTO : Stephen Trafton GlenFed Inc.