Chase Posts $160-Million Loss From Foreign Bonds

Chase Manhattan Corp. said it lost $160 million before taxes from trading in emerging markets in October and as a result may fail to achieve its targeted 15% annual earnings growth.

The losses stem from declines in the value of Brady bonds and Eurobonds the bank held or sold, but were less severe than some analysts suggested before the disclosure.

Trading revenue at the largest U.S. bank accounted for $505 million in the third quarter, or 21% of the bank’s non-interest revenue. The loss in October amounts to $100 million after taxes.

“I would assume that all the banks involved in trading in those markets will have some form of losses,” said Jean Malo, a senior vice president at Daniel Breen & Co., which owned 153,197 shares of Bankers Trust New York Corp. as of June.

Chase is the first bank to report a trading loss stemming from its emerging market activities.

Shares of many of the largest U.S. banks, including Chase, Citicorp, BankAmerica Corp., J.P. Morgan & Co., Bankers Trust New York and BankBoston Corp. have been hit hard in the last three weeks over concerns that they suffered big losses in emerging markets.

On the New York Stock Exchange, Chase shares rose 50 cents to close at $107.25, Citicorp rose $1.88 to $118.25, BankAmerica was up $1.50 to $71.38, J.P. Morgan rose $1.25 to $110.63 and BankBoston rose 19 cents to $77.25.

Most of the Chase losses stem from the wild swings in price suffered by Latin American Brady bonds and Eurobonds, said Peter Tobin, the bank’s chief financial officer. He said the losses came from the sale of securities as well as from recognizing declines in the value of investments the bank holds.

Latin bonds swung violently in the last two weeks of October after steep declines in Asian markets. Mexico’s 30-year government bond, for example, rose as much 15 points in the morning of one session only to tumble 17 points in the afternoon.

By the end of the week, the $160-billion market for Brady bonds had fallen almost 15%. Analysts said Chase’s decision to make an unusual mid-quarter announcement disclosing its trading losses would ease concerns that had sustained even greater losses.