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First Chicago's Profit Soars in 2nd Quarter

July 14, 1988|From Reuters

CHICAGO — First Chicago Corp. posted a $122.9-million second-quarter profit Wednesday, a dramatic improvement over last year's performance that reflects higher income from fees and a more stable lending environment.

First Chicago, the leading banking group in the Midwest, lost $599.9 million in the second quarter of 1987 after adding $800 million to its reserve for non-performing Third World loans.

First Chicago reported that its non-interest income, profit derived from its non-traditional businesses, soared 94% to $234.7 million in the April-June quarter just ended. Fees from its strong credit card business rose to $58.8 million from $32.5 million a year earlier.

First Chicago, the parent of the First National Bank of Chicago, also said it had reduced its foreign loan portfolio by $350 million in the first six months to about $2.6 billion. First Chicago's reserve against non-performing loans stands at 41% of the bank's Third World loans.

The bank last year took a big loss after boosting its reserve, in step with the other U.S. money center banks.

Citicorp led the 1987 round of additions to reserves after Brazil, the biggest Third World debtor, decided to suspend interest payments on its commercial debt.

First Chicago accelerated efforts in the April-June quarter to reduce its troubled Third World loans. Net chargeoffs for swaps and sales of developing-country loans rose to $109 million from $73 million in the first quarter.

"It looks as if they are getting a handle on (their Third World loan exposure)," said Duff & Phelps analyst Richard Mueller. Meanwhile, First Chicago's chargeoffs in other areas declined.

"The strong second-quarter performance demonstrates the continued underlying earnings power of First Chicago," Chairman Barry Sullivan said.

First Chicago's assets rose to $44.43 billion at the end of the second quarter, up from $41.67 billion a year ago.

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