Citicorp, the nation's largest bank holding company, and First Interstate Bancorp, the nation's ninth largest, reported increased third-quarter earnings Monday, though both companies said profits were trimmed by the need to boost reserves against potential loan losses.
Citicorp said quarterly earnings rose 9% to $247 million from the same period last year, a figure generally in line with analysts' expectations. The New York-based company said profits were reduced by sharp rises in operating expenses--up 27% to $1.78 billion--as well as from providing for loan losses.
At Los Angeles-based First Interstate, earnings rose 11.6% from last year, bolstered by a $52.2-million one-time gain from an accounting change on its pension program. It earned $89.3 million in the three months ended Sept. 30, compared to $80 million for the same period a year ago. Nine-month profits were $253.1 million, up $24.8 million.
First Interstate, with assets of $51.4 billion, has 23 subsidiary banks in 12 Western states and franchises its name and services to banks in another six states.
Its chairman, Joseph J. Pinola, said increased income from installment and construction loans was more than offset by poorer returns from other parts of the bank's loan portfolio. Profits also were hampered by a growing reserve for future loan losses and a high level of non-performing loans, Pinola said.
The banking company benefited from a $52.2-million gain from the purchase of an annuity contract covering pension liabilities for most of its retirees.
First Interstate's provision for possible loan losses was $150.5 million in the third quarter, compared to $103.9 million a year earlier. The company's loan loss reserve as of Sept. 30 was $530.7 million, equal to 1.53% of outstanding loans, up from $431.5 million, or 1.35%, a year ago.
Two other major banking companies also reported higher earnings on Monday:
- Union Bank, the Los Angeles subsidiary of Britain's Standard Chartered PLC, reported a third-quarter profit of $14.6 million, a 3% increase over the same period last year. Union, California's fifth-largest bank, said its third-quarter net interest income rose 13%, while non-interest income, including loan fees and investments, fell to $18.3 million from $21.4 million in 1985. For the first nine months of 1986, net income was $39.3 million, a 10% increase over last year's $35.6 million.
- Mellon Bank of Pittsburgh reported an 11.5% increase in quarterly profit. Mellon, the nation's 12th-largest banking concern, reported a third-quarter profit of $52.4 million, compared to $47 million a year earlier. Pittsburgh-based Mellon said its growth in interest revenue during the quarter, partly from assets gained in acquisitions of several financial institutions, was partly offset by an increased loan loss provision and a $7.8-million after-tax loss stemming from unauthorized foreign exchange trading by a trader at Mellon's Tokyo branch.