BANKING: Another Hit Where It Hurts

Another Hit Where It Hurts

After BankAmerica had suffered losses of $855 million over the past two years, Chairman A.W. Clausen gamely reassured stockholders last month that the unpleasant surprises were over. By year's end, he promised, the nation's second largest banking company would be back in the black. Clausen spoke too soon. Last week BankAmerica announced that it expected a staggering second- quarter loss of $1 billion, the largest in its history.

The setback stemmed from an accounting change that put aside $1.1 billion in case the bank's Latin American debtors start defaulting on $7.3 billion in loans. This dose of preventive medicine, prompted by...

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