At Hibernia, Getting a Handle on Bad Loans

Hibernia (HIB Quote) became the latest bank to face the facts about bad loans to businesses, as a new CEO seeks to get a handle on credit quality.

The New Orleans-based bank, whose CEO resigned abruptly on Monday, warned Thursday it will fall short of fourth-quarter and 2000 earnings expectations as it takes a hefty $70 million hit to profits to bulk up its loan-loss provision (essentially a cushion to cover the cost of bad loans). That amount accounts for more than half of the roughly $120 million bad-loan expense the bank expects for the full year. Hibernia now expects fourth-quarter earnings of 10 cents a share, compared with the First Call/Thomson Financial analyst consensus estimate of 34 cents, and 2000 earnings of $1.04, well below the $1.29 consensus. Hibernia shares were up 13 cents to $11.88.

"I think we now know why Stephen Hansel resigned," says Robert Patten, banks analyst at UBS Warburg, referring to the executive who this week was replaced by community banking executive and board member Herbert Boydston. "This is just another reinforcement that syndicated loans to large corporations continue to be impacted by a slowing economy and widening credit spreads. This did not surprise us in the least." Hibernia spokesman Jim Lestelle maintains that Hansel left to pursue other interests. (Patten rates Hibernia a hold and his firm has no underwriting relationship with the bank.)

No Warning?

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