Bank Apparently Borrows more than $700 Million
BOSTON (AP) _ Bank of New England Corp.’s cash crisis apparently hasn’t abated despite the recent sale of more than $1.1 billion in assets, an analyst says.
The Federal Reserve Bank of Boston, considered the lender of last resort for banks, reported Thursday that it loaned an unusually high amount of $723 million to member banks this week.
Marcia Ryan, a Bank of New England spokeswoman, confirmed that the bank borrowed money from the Federal Reserve. She declined to give the amount, except to say it was ″slightly above last week.″
″Our borrowing was as we expected it to be,″ she said.
Gerard Cassidy, an analyst with Tucker Anthony Inc., said Bank of New England likely was the prime borrower, and he said the numbers were particularly troubling because until this week the bank appeared to have gained more control over its problems.
Two weeks ago, the Boston Fed loaned $478 million, and last week the figure dropped to $440 million. At the same time, Bank of New England has completed asset sales of more than $1.1 billion.
″It means the situation is still bleeding,″ Cassidy said.
Bank of New England reported last month that its 1989 losses should exceed $1 billion, largely because of bad real estate loans. The bank has been trying to sell $6 billion of assets to raise cash, after watching depositors withdraw millions of dollars.
Ryan noted that the bank has not received all the proceeds from its recent asset sales, though she could not say specifically how much money the bank has collected.
In comparison with recent Boston Fed lending totals, the weekly figures from mid-December to mid-January ranged from $1 million to $5 million, said Herb Wass, a Federal Reserve spokesman.
The Federal Reserve does not identify the institutions borrowing the money.
Wass stressed that the loans normally are repaid within a day and do not accumulate.
Earlier in the day, it was announced that The Bank of Tokyo had restructured a deal to buy part of Bank of New England’s leasing business after the Japanese company became concerned about the bank’s troubles.
Under the new agreement, Bank of New England will sell Bank of Tokyo its BancNewEngland Leasing Group operations and $500 million of its lease portfolio, and record a profit of $92.5 million.
The original terms of the agreement announced last November would have given Bank of New England a $110 million gain.
″Bank of Tokyo expressed concern about Bank of New England, given the publicity the last few weeks,″ said Tom Lavelle, a bank spokesman. ″There’s been some give and take on both sides.″
Lavelle noted that under the new agreement, Bank of Tokyo will cut by 20 percent the cost to service a $1 billion leasing portfolio retained by Bank of New England.
″The revised terms of the sale do not change the advantages to us of the previously announced transaction,″ H. Ridgely Bullock, the bank’s interim chairman, said in a statement. ″The transaction will help improve our capital ratios and will raise in excess of $500 million in cash.″
Bullock said he hoped to complete the transaction ″within the next several weeks.″