B of A Reports 6% Increase in Profit for First Quarter : But Sale of Brokerage Firm Offsets Loss From Operations

Troubled BankAmerica on Thursday reported a slightly increased profit for the first quarter, largely due to a gain from the sale of its lucrative discount brokerage business, but continued to suffer a loss from operations.

The parent of Bank of America earned $67 million in the first quarter, 6% more than the $63-million profit it recorded in the first quarter of 1986. But the corporation would have lost money during the quarter without the one-time gain of $112 million from the sale of its Charles Schwab brokerage, analysts said.

That gain more than offset a $54-million charge related to the bank’s $2.1-billion portfolio of non-performing loans to Brazil and Ecuador. BankAmerica classified $1.93 billion in loans to Brazil as non-performing after that country suspended interest payments on medium- and long-term debt Feb. 20.

Clausen Sees Progress

The bank, which is attempting to come back from disastrous losses totaling $855 million in 1985 and 1986, suffered an operating loss of $32 million in the first quarter of this year. It lost $78 million from operations in the fourth quarter of 1986.

Chairman A. W. Clausen said in a statement Thursday that he believes the bank made progress toward its “key strategic objective to be the premier provider of financial services in the western United States and to be a pre-eminent wholesale bank providing a range of financial services through our multinational network.”

BankAmerica’s shares closed Thursday at $11.875, a gain of 12.5 cents, in trading on the New York Stock Exchange.

Analysts said BankAmerica’s results conformed to their expectations and indicated that a turnaround may have begun. “They are not in the black yet (on an operating basis), but they are moving in the right direction,” said Dan B. Williams, a bank industry analyst with the Sutro & Co. brokerage in San Francisco. “A pulse has been detected, and it looks as if the patient will survive.”

Williams said he was optimistic because it appears that BankAmerica’s allowance for loan losses has peaked and that, excluding its Brazilian loans, the amount of non-performing loans had declined by $160 million. He and other analysts said they expect the bank to renegotiate its Brazilian loans and possibly avoid further losses.

Felice Gelman, a banking analyst with the New York securities firm of Fox-Pitt Kelton, said BankAmerica still needs to reduce its operating expenses. “It’s very difficult for a bank to reduce its expenses as quickly as it reduces its assets, but that’s really what they have to do.”

BankAmerica said non-interest expense was $1.03 billion for the first quarter, a 2% decline from the first quarter of 1986. The bank’s assets dropped more dramatically during the same period, to $99 billion from $118 billion, as it shed subsidiaries, including Schwab, in order to concentrate on its “core” business.

The bank’s allowance for loan losses stood at $2.17 billion for the first quarter, compared to $1.59 billion for the first quarter of 1986.

“We honestly believe the fundamental trends are positive and we tried to be very careful not to promise miracles,” Frank N. Newman, BankAmerica’s vice chairman and chief financial officer, said at a news briefing in San Francisco. “It takes time and a lot of work to get a troubled company turned around.”