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First Interstate Posts $556-Million Loss For All 1987

January 21, 1988|DOUGLAS FRANTZ | Times Staff Writer

First Interstate Bancorp joined the list of major banks reporting losses for 1987, posting a $556.2-million loss for the year on Wednesday.

The Los Angeles-based company's loss, which contrasted with a profit of $337.9 million in 1986, reflected the costs of strengthening its coverage for troubled Latin America loans and of restructuring the company.

For the fourth quarter, the company reported a loss of $95 million, contrasted with a profit of $84.8 million in the year-earlier period.

First Interstate was one of only three of the nation's biggest 10 banks to add to its loan-loss reserves for Third World debt in the fourth quarter. The addition of $180 million during the period, coupled with $750 million in the second quarter, boosted the bank's reserves to 54% of its exposure and was a major factor in pushing it into the red.

Another factor was a one-time reserve of $95 million established in the third quarter to cover anticipated costs of a program to shed weak assets, trim overhead and improve First Interstate's position as a consumer-oriented regional banking company.

Controlling expenses remained a problem for the company, which has full-service offices in 18 states, is the nation's ninth-largest bank holding company and is the parent of California's fourth-biggest bank.

In the fourth quarter, the cost of staff, equipment and other expenses was $574.6 million, up 1.1% over the same period a year ago. For the full year, expenses increased about 16%, rising to $2.38 billion from $2.05 billion in 1986.

The full-year expenses were pushed up by the $95-million reserve for restructuring and $120.5 million for maintenance and accelerated depreciation on real estate that the company is trying to shed.

Credit quality showed some improvement in the fourth quarter. All major categories of loans listed as non-performing, including international loans, were lower compared to the third quarter.

But the overall category was higher for the year compared to 1986, largely as a result of increased problems with Third World debt.

Non-performing loans totaled $1.5 billion at year-end 1987, with $291 million in the foreign sector and the remainder listed as domestic. The bulk of the troubled domestic loans are real estate related. At the end of 1986, the total was $1.37 billion and foreign loans accounted for $135 million of the figure.

Non-interest income totaled $220.4 million for the fourth quarter and $840.7 million for the year, compared to $264.3 million and $926.3 million for the like periods of 1986. The company said the 1986 figures were higher because of several one-time infusions of cash, such as the sale of its headquarters building in San Francisco.

Assets also were reported down for the year, dropping to $50.9 billion, compared to $55.4 billion in 1986.

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