Citicorp chairman John S. Reed starkly outlined his company's plans for 1993 on Wednesday, saying that reserves are low, credit costs remain high, and plans for growth remain on hold.

"We do know what we are up to," Mr. Reed told a packed room at the Pierre Hotel in New York. "We work it day by day. It's blocking and tackling."

Mr. Reed put in perspective a recent flurry of upbeat analyst reports and stock market activity that has driven Citicorp's shares to around $20 from $16.75 in mid-April.

|Unusual Credit Costs'

The nation's largest bank company has $2.5 billion in "unusual credit costs" from the late-'80s surge in corporate and real estate lending that must be dealt with, Mr. Reed said.

"Presumably," he said, "they will go away over time."

Credit costs for the current quarter, he added, will resemble those of the first three months of the year when Citicorp added $326 million to its loan-loss reserve and wrote off $997 million.

Mr. Reed also conceded that the company's loan-loss reserve is well below the level that most investors expect. At the end of the first quarter its reserve as a percentage of nonperforming loans was 35.4% versus 56.3% for all money-center bank companies, according to Montgomery Securities.

"We know the market expects more reserves," he said, adding, "I don't know when more ends."

Though he did not indicate a clear plan to build reserves, he cautioned that he has no intention of reinstating Citicorp's common stock dividend before earnings and capital have truly recovered from credit-quality problems.

At the company's annual meeting in April, Mr. Reed said that will not occur until citicorp's Tier 1 capital is over 5.5% and its earnings return to $1 billion to $1.5 billion a year.

In 1991, Citicorp lost $457 million. At the end of the first quarter its risk-adjusted Tier 1 capital was 4.06%. Citicorp finished the first quarter with earnings of $183 million after asset sales that netted a gain of over $200 million.

Mr. Reed did offer some upbeat news. Commercial credit costs should begin diminishing in the second half of the year, he predicted. And Citicorp should enter 1993 "with our normal earnings power regained."

Mr. Reed nevertheless implied that the company's frustrations with its regulators continue.

The Federal Reserve Board, he said, is interested in capital strength - meaning that the company's quest to shed assets, build retained earnings, and cut costs must continue. On the other hand, the Office of the Comptroller of the Currency is focusing on reserve adequacy. That's a problem because reserves can be built only by cutting into earnings, the core element of capital.

As a result, 1993 at Citicorp will continue to be characterized by a focus on building capital strength and consolidating gains made primarily through expense cutting.

"We're not going to use [1993] for some excursion into a new business activity," he told investors at a conference sponsored by Sanford C. Bernstein & Co.

He also said that the company has no current plans to issue stock. Citicorp added slightly to its common equity base Tuesday when it exchanged 9.3 million common shares valued at $237 million for some outstanding preferred stock. (See story at left.)

Several investors and analysts said they were unfazed by Mr. Reed's cautious comments.

"It sounds as if he's trying to take a more realistic approach and make sure we don't overreact," said Douglas Pratt, a portfolio manger at Invesco Trust Co. He said he continues to think that profit growth will be substantial over the next 18 months.

Similarly, analyst Diane Glossman of Salomon Brothers said Mr. Reed's guarded tone was sensible.

"I just don't see where the company would benefit by trying to push the earnings excessively in the near term."

Turning to his new strategy for managing the company, Mr. Reed laid out the strategic timetable for his five top managers. President Richard Braddock and vice chairmen Paul Collins and William Rhodes, he said, are focused on short-term issues such as expense cutting, capital management, and credit review. The heads of consumer and corporate banking - Pei Chia and H. Onno Ruding - have a two-to-five year focus for their operating businesses.

He also made it clear that consumer banking "will be the growth engine" for Citicorp in the future. Citicorp's consumer sector earned $260 million in the first quarter.

Corporate banking will be a steady, sustainable business that should provide after-tax earnings of $500 million annually, he said. The corporate bank contributed net income of $161 million in the first quarter of 1992 after losing $593 million in 1991.

Mr. Reed said Citicorp is carrying its nonperforming real estate assets at about 60 cents on the dollar, a valuation that analysts and investors lauded as conservative.

Mr. Reed also said Citicorp has hefty unrealized gains in its portfolio of equity investments in Latin America. The value of those investments is higher than the face value of the debt that was swapped for the investments, though he declined to say how big the portfolio is.

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