3 Major Banks Report Sharply Higher Income

Security Pacific, Chemical New York and Manufacturers Hanover on Thursday reported sharp increases in first-quarter income, indicating the beginning of a rebound from a tough banking year.

Security Pacific Corp. of Los Angeles on Thursday reported a 26% jump in net income to $147.2 million for the three months ended March 31 because of reduced credit losses not related to Third World debt and a slowdown in expense growth. In the first quarter of 1987, net income totaled $116.5 million.

Chemical New York Corp. recorded a 46% increase in income and Manufacturers Hanover posted a 73% profit boost.

In 1987, several banking companies reported losses as loans to developing countries crumbled and economies in several oil-dependent states continued to fare poorly.

For example, Security Pacific managed to eke out $15.7 million in 1987 profits despite a $39.4-million loss in the last quarter because the bank added $350 million to its reserves for Third World loans. Chemical lost $853.7 million in 1987 and Manufacturers Hanover lost $1.14 billion.

As indicated by the first quarter, Security Pacific is “beginning to see some very positive results from our programs to control expense growth,” said Richard J. Flamson III, chairman and chief executive of the nation’s seventh-largest banking company.

Non-interest expense stood at $730 million, up 10% from year-ago totals and 7% after excluding the effect of the second-quarter 1987 Oregon BanCorp purchase. In the fourth quarter, non-interest expense was growing at a 13%-14% rate, said Jay Gould, Security Pacific senior vice president. The decline indicates, in part, that the 1987 acquisitions of Oregon BanCorp and Seattle-based Rainier Bancorp “are now starting to pay off,” he said.

Gould also pointed to a $30.8-million improvement in net credit losses not related to Third World debt. Such losses reached $71.3 million during the quarter.

Chemical New York reported net income of $125.5 million, up from $86.2 million a year ago. The No. 4 banking firm posted the increase despite an $11.6-million loss at its Texas subsidiary. Chemical’s income from loans slipped to $464.2 million during the quarter, but fees from trust and other services rose 6.7% to $168.3 million.

Manufacturers Hanover, the nation’s sixth-largest bank holding company, posted record net income of $140.3 million in the first quarter, compared to $81.0 million in the same period last year.

Manufacturers Hanover said it recorded substantial increases in trading revenues and fees from acquisition finance and financial advisory activities. Revenues from all trading activities were $67.3 million, up 72.4% from $39.1 million in the first quarter of 1987.

Net interest revenue totaled $495.3 million in the first quarter, compared to $509.8 million in the same period last year.