Marshall & Ilsley Sees First Bad-Loan Drop In 4 Years

   DOW JONES NEWSWIRES 
 

Marshall & Ilsley (MI) said bad loans fell in the third quarter for the first time on a sequential basis in four years, a possible sign that the credit woes affecting banks may have peaked.

But shares fell 3 cents to $7.91 as the company also projected a quarterly loss wider than analysts' expectations amid a nearly $185 million loss provision on holding-company loans.

"While we see some continuation of improvement in credit quality, and read these as hopeful signs of what's ahead, we will continue to manage the business as though the recessionary effects in the economy will remain for several more months," said President and Chief Executive Mark Furlong. "There simply are an inadequate number of consistent trends to reinforce the sentiments that the economy is stabilizing and better times are within sight."

Wisconsin's largest bank has cut costs and jobs and slashed its dividend to preserve cash. It has struggled with heavy exposure to some of the most troubled housing markets, as well as commercial construction loans.

The company said Tuesday it expected nonperforming loans to fall $170 million from the second quarter, or 4.9% of total loans. It also sees early stage delinquencies down $220 million, or 20%, sequentially, putting them at the lowest level in six quarters.

The company reiterated its forecast for a loan-loss provision of $390 million to $400 million, excluding nearly $185 million for holding-company loans. That compares with the $468.2 million in the second quarter and $155 million a year earlier. Marshall & Ilsley said the special provision was due to new regulations on bank holding companies.

As a result, the company projected a loss of 68 cents to 70 cents a share. The mean estimate of analysts surveyed by Thomson Reuters was a loss of 39 cents.

-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354; [e-mail]