U.S. Bancorp Plans to Double Loan Provision, Chop Profits

U.S. Bancorp said it expects to almost double its loan-loss provision in the second quarter, pushing profits 13% below the year-earlier level.

The Portland, Ore.-based company said its provision for loan losses would be between $40 million and $42 million, up from $21.6 million in the first quarter and $21.5 million in 1990's second quarter.

The company is still reviewing loans, and nonperforming assets could rise by as much as $60 million, to about $400 million, officials said.

Regulators Blamed

Kevin R. Kelly, the company's president, attributed the results to tougher loan standards imposed by regulators.

"Arguments are still going on over a collection of credits that have never stopped performing," he said.

The new nonperforming loans are a mixture of real estate and commercial credits but do not include forest products companies or borrowers in leveraged deals, officials said.

U.S. Bancorp said it expects to report second-quarter earnings in the range of $40 million to $42 million, compared with $49.3 million in the first quarter and $47.3 million in 1990's second quarter.

The company, with $18.5 billion in assets, issued a preliminary earnings release amid mounting concerns about the health of its loan portfolio.

Top Rival Posted a Loss

First Interstate Bank of Oregon, its largest rival in the state, said last week that it would report a second-quarter loss of about $40 million because of problem credits for real estate and the forest products industry.

First Interstate's "problems are unique," Mr. Kelly said. Oregon's economy is still growing, though more slowly than in previous years, he said.

Wells Announcement Hurt

Speculation about loan problems has battered U.S. Bancorp's stock, which had fallen 19% between June 25 and mid-afternoon July 3.

The stock also was hurt by Wells Fargo & Co.'s announcement two weeks ago, after a federal review of its syndicated loans, that it would take a big increase in its loan-loss provision to cover credits for highly leveraged transactions.

U.S. Bancorp's HLT portfolio has been shrinking, but the company still has aroung $600 million outstanding in leveraged-deal credits.

Nevertheless, in May it came through "without problems" the same shared-credit examination that rocked Wells Fargo, said Donald F. Bowler Jr., the company's chief of investor relations.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.