Bank of Hawaii's Parent to Add $42M to Reserves for Asia Woes
Chase, Brett, American Banker
Pacific Century Financial Corp. of Honolulu said fallout from Asia will force it to add $42 million to its loan-loss reserve for the second quarter.
The provision would be more than double the $18 million of the first quarter and would exceed the $30.3 million set aside in all of 1997.
The total for the first two quarters of 1998 would be larger than Pacific Century's total loss provisions in the previous two calendar years.
It is an indication that U.S. banks are not yet in the clear from Asia's troubles, and Pacific Century-the parent of Bank of Hawaii-is in the thick of them.
It said the second-quarter provision would cover chargeoffs of $27 million, including $14 million in Thailand and $3 million in Indonesia. It also said it must "further bolster the reserve for loan losses in recognition of the continuing financial volatility in the Asian markets."
At the same time, the $14.8 billion-asset bank holding company, the largest based in Hawaii, pre-announced a $19.4 million restructuring charge in the second quarter related to previously announced branch closings and mergers.
The end result will be "a nominal net profit" for the quarter and no change in dividend outlays, a statement said.
Chairman and chief executive officer Lawrence M. Johnson said, "The provisioning is consistent with our traditionally conservative credit philosophy."
He said, "We view this as a positive step which will enable us to move ahead focused on our financial objectives as well as our previously announced redesign initiatives."
Richard J. Dahl, president and chief operating officer, said the losses are concentrated in Thailand and Indonesia. He said Pacific Century expects to weather the Asian storm and has no plans to change its strategy in the region.
"We still believe very strongly in the long-term fate of Asia," Mr. Dahl said. "We've been doing business there for 40 years. …