First Interstate Bancorp, one of the nation's largest banking concerns, on Wednesday reported a 27 percent rise in its first quarter profit over a year ago, when the company battled troubled domestic and Third World loans. Net income for the three months ended March 31 totaled $102.6 million, or $2.20 a share, compared with earnings of $80.5 million, or $1.69 a share. Chairman J.J. Pinola said First Interstate decided last year to increase its loan-loss reserves, and that contributed to the improvement this year. First Interstate posted a loss of $556.2 million for fiscal 1987 because of writeoffs and an addition to its loan-loss provision. Allowances for loan losses at the end of the first quarter stood at $1.39 billion, up from $542 million a year ago. However, during the quarter the copmany reduced its provision for loan losses to $76.4 million from $99.5 million. Net loans charged off were $108.9 million, compared with $92.9 million, First Interstate said. The company said its writeoff fund increased due to its January acquisition of Houston-based Allied Bancshares in a complex stock swap worth between $415 million to $450 million. Allied held a number of distressed properties in Texas, which has been hit by an oil industry slump. First Interstate has taken steps to shed those properties. First Interstate said net interest income rose by 8.7 percent during the quarter while non-interest income was up 4.2 percent.