Newspaper article THE JOURNAL RECORD

More Real Estate Woes Expected by Two Banks

Newspaper article THE JOURNAL RECORD

More Real Estate Woes Expected by Two Banks

Article excerpt

NEW YORK (AP) - The heads of the nation's two largest banking companies, Citicorp and Chase Manhattan Corp., say they expect an increase in problem real estate loans this year.

Citicorp Chairman John Reed told securities analysts this week that the commercial real estate market ``will be difficult for awhile'' and force the nation's largest banking company to write off more loans than expected.

He said the write-offs would be higher than the $53 million in commercial real estate write-offs taken in 1989, but declined to be more specific.

Factors contributing to the poor market, he said, are deterioration in the economy, reduced market liquidity that is making it harder for investors to find buyers for buildings they had hoped to sell and increased regulatory attention to the possibility of problem real estate loans.

Nonetheless, Reed said despite the higher write-offs, Citicorp's commercial real estate business would continue to be profitable in 1990.

Citicorp reported it had $17.3 billion in outstanding commercial real estate loans as of Dec. 31, 1989.

In a separate presentation to another group of securities analysts earlier in the day, Chase Manhattan President Thomas Labrecque said he expects to see a steady increase in problem real estate loans over the next several months as sluggishness in many commercial and residential markets continues.

``We had expected a cyclical market downswing for two years,'' Labrecque said. ``We took steps to limit our growth and tighten our underwriting and appraisal standards.''

Chase placed $783 million in domestic real estate loans on a nonaccrual basis at the end of 1989, a 49 percent jump from the $527 million the previous year.

When loans are placed on nonaccrual status, banks no longer include on their statements the interest and other charges due on the loans until the money is actually received.

As the current sluggish real estate environment persists, Labrecque said, the number of these non-performing loans is expected to increase moderately in the first quarter and ``somewhat more over the next quarters. …

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