First Interstate Bancorp Posts Record Earnings

Los Angeles-based First Interstate Bancorp posted record earnings and Manufacturers Hanover in New York reported a 13.4% profit gain, continuing the trend of healthy results at most major U.S. banks.

First Interstate, the nation’s eight-largest banking firm, reported net income of $80 million for the third quarter, up 13.8% over last year.

Joseph J. Pinola, chairman and chief executive, said strong interest margins and healthy loan growth fueled the bank’s earnings. But he added that a relatively high level of bad loans continues to dampen profits.

First Interstate wrote off $77.6 million in loans in the third quarter, compared to $48.5 million a year ago. The bank identified higher-than-expected losses from credit cards as a factor.

Manufacturers Hanover, the fourth-ranked U.S. banking company, said quarterly earnings were $100.5 million, a 13.4% increase over a year ago.

The bank attributed the improvement to higher interest income and a tax break from a change in New York law. Partially offsetting these gains were higher loan losses and an increased provision for future problem loans, the bank said.

The bank charged off $108.2 million in the third quarter, compared to $63.1 million in the same period last year.

The bank said that $723 million of the company’s loans to Argentina were classed as non-performing, even though it had received payments on a portion of those loans. All of Argentina’s creditor banks received some payments in the third quarter, but they are still treating the loans as troubled.