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Banks Report Mixed 4th-Quarter Results

January 21, 1988|From Times Wire Services

NEW YORK — American banks posted more uneven earnings reports Wednesday for the quarter ending in December, with the results depending mainly on whether they added more money to reserves against possible losses on Third World loans.

Bankers Trust New York said its quarterly earnings tripled to $284.5 million, while Irving Bank, which increased its loan-loss reserve, posted a $175.8-million loss.

Chicago-based Continental Illinois reported a fourth-quarter loss of $235.8 million after increasing its reserves.

Bankers Trust, the nation's eighth-largest bank, said the sharp rise in its quarterly income was mostly a result of higher foreign exchange trading and non-interest income.

But the bank's decision in May to add $700 million to its reserve for risky Third World debt knocked its profits for the year down to $1.2 million from $427.9 million in 1986.

Irving, also based in New York, said it lost $175.8 million in the fourth quarter, in contrast with a $31-million profit in the 1986 quarter, after adding $250 million to reserves. For the year, Irving lost $193.3 million, contrasted with a 1986 profit of $128.1 million. Along with most other big American banks, Irving in the second quarter boosted its provision against possible losses on developing country--especially Latin American--loans.

In recent weeks, many regional banks embarked on a second round of reserve additions. Investors have been watching the big New York banks, which started releasing their quarterly figures this week, to see if any would join in the move to increase reserves.

While many regionals have reserves totaling 50% of outstanding Third World loans, most of the New York money center banks' reserves come to around 25%. Irving said its fourth-quarter addition increased its reserve to 33%.

Continental Illinois' $235.8-million loss for the fourth quarter contrasted with the previous year's $43.5-million profit. The bank said the loss reflected a $200-million addition to its loan-loss allowance, which stands at about 50% of developing country loans.

The 14th-largest U.S. bank, Continental, said its $609.5-million loss for the year masked improved results at its core businesses, such as rising fee income and trading profits.

Continental, which was rescued in 1984 with government help, said its non-performing loans, other than Third World loans, declined sharply to $285 million from $547 million last year.

The bank said it also added $9 million in the fourth quarter to its reserve against future losses at its unit First Options of Chicago Inc.

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