BankAmerica Reports Record 2nd-Period Loss : Firm $1.13-Billion in Red After Boosting Its Reserve

SAN FRANCISCO — BankAmerica posted a record second-quarter net loss of $1.136 billion as a result of its previously reported decision to add $1.1 billion to its loan-loss reserve to cover bad loans to developing nations.

“It is hard to feel terribly jubilant” about such a huge loss, Vice Chairman and Chief Financial Officer Frank N. Newman said in an interview.

Still, he added, “there were some significant positives in the report,” including a third consecutive decline in actual credit losses and a $400-million drop in non-accrual loans.

Gains Posted in Some Divisions

Chairman A. W. Clausen said in a prepared statement that “as we move forward, operating results should reflect our intensified efforts to generate revenue, reduce operating expense and strengthen the quality of the portfolio.”

On the negative side, BankAmerica took a $65-million charge to reduce the carrying value of its subsidiary in Argentina, a $14-million charge for vacant office space and a $23-million charge relating to problems in converting to a new trust department computer system.

Gains of $102 million were tallied on the sale of Bank of America’s Consumer Trust Services Division, its Banhaus Centrale Credit A.G. unit and its West German credit card operations.

The company’s total assets fell to $97 billion at the end of the second quarter, causing it to fall to No.3 among U.S. banking companies, behind Chase Manhattan with assets of $97.9 billion. Citicorp ranks No. 1.

BankAmerica is fast running out of good assets to sell, having sold off its consumer lending subsidiary, discount brokerage unit, San Francisco and Los Angeles headquarters buildings and other prime holdings to bolster its perilously thin equity ratio.

BankAmerica staff dropped 3,900 during the second quarter, to 62,900, reflecting divestitures and tightened controls on expenses.

Donald Crowley, an analyst for Keefe, Bruyette & Woods in San Francisco, acknowledged that the troubled banking concern is moving in the right direction and should post a fourth-quarter profit after breaking about even in the third quarter.

But, he noted: “They still have a fairly high level of non-performing assets”--loans on which the bank isn’t receiving interest. “How quickly will those come down, and how much of the chargeoffs will be associated with them?”

For the first half, BankAmerica’s net loss totaled $1.07 billion. In the year-ago second quarter and half, BankAmerica lost $640 million and $577 million, respectively.