Magazine article American Banker

Bank of California Reports a Big Loss as Realty Sours

Magazine article American Banker

Bank of California Reports a Big Loss as Realty Sours

Article excerpt

Bank of California Reports A Big Loss as Realty Sours

SAN FRANCISCO - In another sign of the slump in California real estate, the Bank of California has disclosed a loss of about $183 million in the second quarter after taking a special loan-loss provision of $200 million, huge for a bank of its size.

The San Francisco-based bank, owned by Mitsubishi Bank Ltd., Tokyo, earned $14.7 million in the second quarter of 1990 and $14.8 million in the first quarter this year.

In the fourth quarter of 1990, it lost about $19 million following a $50 million provision.

The second-quarter provision is among the largest yet made by a Golden State bank to cover real estate losses. The bank has $8.9 billion in assets, making it sixth-largest in the state and the second-largest in Japanese-owned bank in the United States.

While the latest addition to reserves is designed to cover potential losses in several lending areas, "by far our biggest problem is real estate," Bank of California president and chief executive Yasumasa Gomi said.

The bank has offices in Washington, Oregon, and California, but the biggest category of problem loans is for home construction in Southern California, Mr. Gomi said.

Bank of California's provision "is part of a trend," said Campbell K. Chaney, an analyst with Sutro & Co., San Francisco. "Those banks with the most aggressive underwriting standards take the hits first."

Using Own Judgment

Except for a small portion allocated for highly leveraged transaction loans, Bank of California took the latest provision on its own initiative, not because or regulatory pressure, bank officials said. …

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