Citicorp and three other major national banks yesterday reported declines in their second-quarter profits, as did some of the Washington area's largest banking companies. Both national and local banks cited soft real estate markets as a factor in the earnings slides.

Citicorp, the nation's biggest banking company, said its second-quarter profit dropped 37 percent because of weakness in the real estate market and the failure of Argentina and Brazil to pay interest on their loans.

Three other major banking companies reported declines for the quarter: Chemical Banking Corp.'s profit fell 12.6 percent, Manufacturers Hanover Corp.'s tumbled 68.9 percent and Bank of New York Co.'s fell 39 percent.

Wells Fargo & Co. said a one-time gain on a joint venture helped lift its second-quarter profit by 58 percent from a year ago.

The reports came on the heels of second-quarter profit declines at two other leading banking companies. Chase Manhattan Corp. said Monday its profit plunged 62 percent, while earnings fell 35 percent at First Chicago Corp.

"The operating environment for the banking industry has been poor," said James J. McDermott Jr., research director at the New York-based bank securities firm Keefe, Bruyette & Woods Inc. "Most banks are bedeviled by deteriorating real estate asset quality and a slow operating economy."

Among Washington-area banks reporting second-quarter performance, Sovran Financial Corp., Dominion Bankshares Corp. and First Maryland Bancorp noted modest to sharp earnings declines, while Central Fidelity Banks's profits rose and Loyola Capital's earnings were flat.

Sovran Financial, the area's second-largest banking company, said it earned $22.1 million (37 cents) in the second quarter, down 66 percent from $65.5 million ($1.10) in the 1989 quarter. Sovran earned $88.7 million ($1.48) in the first half, down 30 percent from $127.4 million ($2.13) in the first half of last year.

Dominion Bankshares Corp., parent company for Dominion Bank, said it earned $20.3 million (53 cents a share) in the second quarter, compared with $23.2 million (61 cents) in the same period last year.

For the first half, the Roanoke-based banking company earned $6.4 million (15 cents), down 86 percent from $46.6 million ($1.21) in the first half of 1989. The bank said the first-half decline reflected Dominion's unusually large first-quarter addition to the reserve it carries for possible losses on bad loans.

Loyola Capital Corp., the holding company for Loyola Federal Savings and Loan of Baltimore, said its earnings remained virtually unchanged for the second quarter at $2.68 million, compared with $2.73 million in the year-ago second quarter. Profit per share rose to 56 cents from 54 cents as the number of outstanding shares declined. For the first six months, Loyola earned $4.97 million ($1.03), down slightly from $5.3 million ($1.05) in the first half of 1989.

Although many area financial institutions have reported increasing losses on real estate loans, Loyola said its problem assets decreased in the quarter to $27.4 million because of "conservative lending in a stable market" -- enabling it to reduce its provision for loan losses.

For Central Fidelity Banks of Richmond, earnings rose 4.6 percent, to $14.2 million (93 cents) in the second quarter, from $13.5 million (88 cents) in the 1989 second quarter. The company earned $28.2 million ($1.84) in the first half, compared with $26.5 million ($1.72) in the first six months of last year.

Although the bank said its nonperforming assets rose to $29.2 million, nearly double the amount reported in the first quarter, its reserves kept the problems from affecting the bottom line. The bank attributed the increase in nonperforming assets to soft real estate markets in parts of Virginia.

Central Fidelity's total assets as of June 30 were $5.7 billion, up 19.2 percent over last year.

First Maryland Bancorp of Baltimore, whose principal subsidiary is First National Bank of Maryland, reported a 57 percent decline in earnings, to $6.8 million from $15.9 million in the second quarter last year.

The bank, a subsidiary of Allied Irish Banks, Ireland's largest banking company, reported a first-half profit of $25.7 million, compared with $30.8 million in the same period in 1989.

The company said second-quarter earnings were depressed by a $20 million addition to the company's loan-loss reserve, "in recognition of the economic slowdown in the mid-Atlantic region."