Citicorp earned dollars 171m ( pounds 89m), or 32 cents a share in the quarter, compared with a gain of dollars 11m a year ago. It also added dollars 181m to its domestic loan loss reserves, and bolstered its critical Tier 1 capital level to 4.25 per cent - comfortably above the 4 per cent level it must show by the end of this year.
'We are where we had expected to be,' John Reed, the chief executive, said. 'The results are further evidence that we are on track.'
Wall Street analysts were generally pleased with the results, which showed Citicorp's recovery to be on schedule. Citicorp continues to show a bias towards improving its capital ratios rather than its loss reserves, Diane Glossman, an analyst with Salomon Brothers in New York, said. While credit quality has stabilised, the bank will have to continue reserving for property lending losses, she said. Citicorp wrote off dollars 100m of loans to Olympia and York Developments in the second quarter.
Debt agreements with Brazil, Argentina and the Philippines allowed the bank to release dollars 100m from its Third World loan portfolio. The main factor in its improved capital ratio was the sale of CapMAC, its credit card unit.
Chemical Banking reported a second-quarter profit of dollars 240m compared with dollars 184m for the 1991 quarter, although the earnings amounted to an identical 83 cents a share because of the issue of new equity as part of its merger with Manufacturers Hanover Trust.
Pre-tax earnings rose 72 per cent, but analysts said they were somewhat lower than expected because of a slowdown in trading profits.
John McGillicuddy, Chemical Banking's chief executive, said that the merger with Manufacturers Hanover is expected to save Chemical dollars 280m in expenses this year, well above the dollars 225m originally projected. However, analysts said that projection was widely regarded as too conservative.