CANADA BANKS COULD SEE PRESSURE ON BRAZIL LOANS

  Canada's major banks will likely face
  stiff pressure to declare their Brazilian loans non-performing
  if, as expected, major U.S. banks take similar action after the
  end of their first quarter tomorrow, analysts said.
      American bankers said last week that slow progress in debt
  talks with Brazil increased the likelihood that U.S. banks
  would soon declare their Brazilian loans non-performing.
      Such action "would put a lot of pressure on the Canadian
  banks to do the same," Levesque, Beaubien Inc Toronto-based bank
  analyst Donna Pulcine told Reuters.
      "They (banks) like to appear to be conservative," said
  Pulcine, "and if a major bank puts loans on a non-performing
  basis and the Canadian banks don't, there is going to be a lot
  of pressure from shareholders as to why one bank is considering
  the loans non-performing and another bank is not."
      Wood Gundy Inc bank analyst Patricia Meredith said any
  willingness by a major Brazilian bank creditor such as Citicorp
  &lt;CCI> to declare its Brazilian loans non-performing rather than
  let Brazil dictate settlement terms would provide a compelling
  example for other creditor banks.
      "In order to make that strategy work, they (Citicorp) have
  to have the support of the other banks," said Meredith.
      Bank analyst Michael Walsh at First Marathon Securities Ltd
  said at least one Canadian bank, which he declined to identify,
  "wants to put (the Brazilian loans) on a non-performing basis
  and is trying to encourage the others to take that position."
      Canadian banks are owed about seven billion Canadian dlrs
  by Brazil, which late last month suspended interest payments on
  its 68 billion U.S. dlr foreign bank debt.
      Banks in Canada, although allowed to wait up to 180 days
  before declaring loans on which they are receiving no interest
  as non-performing, usually move on such loans within 90 days.
  They could therefore delay action on the Brazilian loans until
  late May, which falls in Canadian banks' third quarter ending
  July 31.
      &lt;Bank of Montreal>, Brazil's largest Canadian bank
  creditor, said last week it was not currently considering
  declaring its 1.98 billion dlrs of Brazilian loans as
  non-performing.
      "I think that is just for the benefit of the public," Walsh
  said of Bank of Montreal's statement. 
      Some analysts predicted minimal earnings impact on Canadian
  banks from a move to declare the Brazilian loans
  non-performing.
      They said Brazil would likely resume interest payments by
  the banks' fiscal year-end on October 31, thus allowing banks
  to recoup their lost interest income.
      "From what Brazil has said, it is quite likely the banks
  will get the money," said Meredith. "My outlook at this point is
  optimistic that there will be no adjustment for the full-year's
  earnings."
      Meredith forecast 1987 fully diluted per share earnings of
  3.80 dlrs for &lt;Royal Bank of Canada> compared with 3.74 in
  1986; 4.30 dlrs for &lt;Bank of Montreal> compared with 3.59; 2.25
  dlrs for &lt;Canadian Imperial Bank of Commerce> compared with
  2.23;  2.15 dlrs for &lt;Bank of Nova Scotia> compared with 1.94,
  and 2.85 dlrs for &lt;Toronto Dominion Bank> against 2.74.
      She forecast 1.90 dlrs for &lt;National Bank of Canada>
  against 3.30 dlrs before a two for one stock split.
      Analyst Pulcine said she might lower full-year earnings
  estimates for the banks by between two cts and 10 cts a share,
  assuming a possible settlement reduced Brazil's interest costs.
      "If the banks didn't receive anything for the rest of the
  fiscal year, the impact could range from 16 cts to 70 cts a
  share. But I don't see that as a likely scenario," Pulcine said.
      Walsh at First Marathon suggested, however, that the
  Brazilian debt situation was so complex that "it could drag on
  beyond one full fiscal year."
      He said he foresaw having to lower his 1987 fiscal earnings
  forecasts for the banks. He estimated that Brazil's yearly
  interest payments to Canadian banks totaled about 575 mln dlrs
  or about 10 pct of their total 1986 pre-tax earnings.
  

