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Chase Bank to cut Florida operations

Chase Bank of Florida N.A., struggling with bad loans, will either drastically reduce or eliminate its corporate and commercial real estate lending operations and try to focus on consumer banking. The Tampa-based bank hopes to stem continuing losses caused by its problem loans and exploit its well-recognized name among new arrivals to Florida.

"We are downsizing commercial lending," said J. Webster Hull, president of Chase's Florida operation. Asked whether Chase would shut its commercial-loan business, Hull said the bank "will put all commercial lending under evaluation as we go forward."

Hull said the bank had not decided when to put the plan into effect, but it would be sometime soon.

In a statement to Chase employees Wednesday, Hull said some Chase workers may lose their jobs through the restructuring. However, some laid off workers may be eligible for jobs with other Tampa-area Chase operations, including its student loan, mortgage or credit card divisions. Hull said he did not know how many employees were involved in the commercial lending operations.

By focusing on consumer banking, Chase hopes to cash in on the 300,000 new residents who move to Florida each year. "We are going to emphasize that part of our business and redeploy our assets more intensively into that area," Hull said.

Analysts said the move was not surprising, given Chase's problems in Florida and other states, such as Arizona. Both Chase's Florida and Arizona operations are subsidiaries of Chase Manhattan Corp. of New York, the nation's third largest banking company, with assets of about $100-billion.

Chase's switch to retail and consumer banking is part of a trend among traditional corporate lenders. Businesses no longer rely exclusively on banks for loans, often turning to financial markets for funds. This has made commercial lending less profitable as banks have been forced to bid more aggressively for business.

Florida is also a market particularly suited to retail banking. The state is home to millions of transplants from other states who bring deposits with them. Barnett Banks Inc. of Jacksonville, with it vast network of more than 500 branch offices, has become the leading banking company in Florida by concentrating on collecting these consumer deposits and making small loans. First Florida Banks Inc. of Tampa, a

traditional commercial lender, late last year announced a reorganization to emphasize consumer banking.

"I think retail banking, making small loans and mortgages and credit card loans, makes sense," said John Mason, a bank analyst with Interstate/Johnson Lane Inc., in Atlanta, adding that Chase probably has decided to either make a final attempt to earn a profit on the bank or close it. "Their thinking is they're either going to close it down or sell it or try to make the most of it."

Mason said that Chase has fared poorly in venturing outside of New York, particularly in Arizona. Last year the company wrote off a staggering $126-million in bad loans in its Arizona bank, mainly on commercial real estate.

While Chase has name recognition, it also is handicapped by its sparse branch network. Chase now has offices in downtown Tampa, St. Petersburg, Fort Myers, Clearwater, Pinellas Park, Orlando and Palm Beach.

Chase gained its stake in Florida in 1986 when it bought $300-million in assets and the offices of insolvent Park Bank of St. Petersburg. The Federal Deposit Insurance Corp. absorbed another $300-million in bad Park Bank assets.

Since buying the Park assets, Chase has tried to emphasize corporate lending to small and medium-size businesses and commercial real estate developers. During the last four years, it has nearly doubled in size to $580.5-million in assets as of last Sept. 30, according to Sheshunoff Information Services Inc. of Austin.

But the growth has come at a price. An unhealthy 4.5 percent of Chase's total loans are either not paying interest or are in foreclosure. Healthy Southeast banks generally have a problem-loan rate of about 1.5 percent.

Although some of these problem loans were inherited from Park Bank, the effect is the same: Chase had an operating loss of $917,000 during the first nine months of 1989.

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