Magazine article American Banker

Bank One Sold $500M in First Half

Magazine article American Banker

Bank One Sold $500M in First Half

Article excerpt

Bank One Corp. sold more than $500 million of nonperforming loans in the first half to streamline costs,, chief executive James Dimon told investors, and it plans to keep shedding problem loans if the price is right.

The Chicago company sold $375 million of loans in the first quarter and $147 million in the second as a way of "getting our hands around credit," Mr. Dimon said late Monday at the Merrill Lynch Banking and Financial Services Conference.

"We are trying to set the stage," he said. "We have to get the company performing well before we can spread our wings and grow the company."

Bank One's nonperforming loans grew from $730 million in the second quarter of 2000 to $1.05 billion during the same period this year. Loan-loss reserves increased from $2.9 billion to $4.2 billion.

The loan sales are "purely discretionary" and are based on economics, Mr. Dimon said. He would not reveal the price the bank received; it has charged off $80 million in loans as a result of loan sales.

By selling the loans, Bank One can reduce its need for reserves. "We are recognizing our losses and problems immediately," Mr. Dimon said. "The culture is changing."

Christopher Marinac, an analyst with SunTrust Robinson Humphrey, said periods of high liquidity in the markets are important in determining whether to sell the loans.

"If you look at the signals second-quarter earnings results given in July, they were looking at cold-blooded economics," Mr. …

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