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Citicorp Decides to Pull Out of Bidding for Ailing FCA

November 19, 1987|JAMES S. GRANELLI | Times Staff Writer

Citicorp, the nation's biggest commercial banking firm, has decided it wants no part of troubled Financial Corp. of America, which owns the nation's largest savings and loan, a federal regulatory official said Wednesday.

Citicorp's decision, relayed to the Federal Home Loan Bank Board on Monday, came less than a month after the New York company had indicated that it was interested in buying at least a portion of Irvine-based FCA.

The decision also leaves First Nationwide Bank in San Francisco as the only serious bidder for beleaguered FCA, which needs $900 million in new capital in order to achieve the level required by federal regulators. The bank board has been orchestrating efforts to either find new funds or a buyer for FCA.

On Monday, FCA had presented the bank board with a proposal to raise capital by segregating its assets through the breakup of its $33-billion-asset operating unit, Stockton-based American Savings & Loan, into four subsidiaries. The company views the proposal as a backup in case negotiations to sell FCA fall through.

The bank board will continue studying First Nationwide's proposal, Karl T. Hoyle, an executive on the staff of the bank board, said Wednesday. The three board members have not yet seen the FCA plan, he said, though staff members are reviewing it.

Citicorp gave no reason for dropping out of the bidding, Hoyle said. Citicorp and First Nationwide executives could not be reached, and FCA officials would not comment.

Citicorp's decision was delivered to the bank board at about the same time that the New York banking company was deciding to eliminate 1,000 jobs by the end of 1988 as part of a reorganization aimed at curtailing increases in non-interest expenses.

One of several financial institutions and private investors that have expressed interest in buying all or part of FCA over the past year, Citicorp indicated within the last month that it was particularly interested in purchasing American Savings' burgeoning network of 184 retail branches throughout California.

Citicorp already owns California's 14th-largest S&L, Citicorp Savings in San Francisco, which has $7 billion in assets.

American Savings' branches are considered its most prized possessions. But FCA also has hundreds of millions of dollars in tax credits that are potentially attractive to profitable companies, which could use the benefits to cut their taxes.

Citicorp's recent interest in acquiring a portion of FCA reportedly came in response to the bank board's efforts to solicit a bid to compete with First Nationwide's offer.

The $1-billion bid by First Nationwide, which is owned by Ford Motor Co., could take a big financial bite out of the bank board's insurance arm, the Federal Savings and Loan Insurance Corp. Terms of the bid would require $3 billion to $4 billion in federal assistance over five years, along with FSLIC guarantees for future loan and interest rate losses.

FCA's proposal to break up the company could cost the FSLIC $1 billion to $2 billion.

The separate operations envisioned in the FCA plan would include two traditional savings and loan firms and two operations in which $5 billion in problem assets and $14 billion in mortgage-backed securities would be combined.

FCA lost $75.8 million in the third quarter, contrasted with an $11.6-million profit for last year's third quarter. Its net worth--also known as shareholders' equity--at the end of September stood at $61.2 million, down from $294 million a year earlier.

The company lost $243.4 million in the first nine months of the fiscal year, contrasted with $72.2 million in net income for the same period last year.

FCA's regulatory net worth, another standard for measuring an S&L's financial condition, stood at $358 million at the end of the quarter, compared to $528 million a year earlier.

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