First Commercial assures AMC bidders

First Commercial Bank (第一銀行) is confident it can recover a "reasonable" portion of its NT$13 billion in bad-loan collateral that it plans to put up for auction later this month.

Foreign and local asset management companies (AMCs) have been keen on placing bids at the March 27 auction.

So far, 11 AMCs expressed interested in shopping for bargains at the event. The open competition among AMCs for the non-performing loans (NPLs) is anticipated to help First Commercial recover a sizeable portion of the bad loans' value, the bank said.

"We'll not set up a lowest price for bidders to start with. However, if the highest offer does not match the price we want to sell for, we will negotiate again to avoid failed bids," the bank's vice president Huang Shiu-nan (黃秀男) said.

The auction will be open, time-saving and the first ever in Taiwan, he said.

PriceWaterhouseCoopers, which advises the bank on the assets' management said in a written statement that "now is the best time for domestic banks to clean up non-performing assets since foreign investors have a favorable assessment of Taiwan's market."

"We're confident that the bidding mechanism will help the bank receive the best price," managing director Jeffrey Shia (夏中興) said in the statement.

Shia added that the bank plans to write off a total of NT$62 billion in bad loans before the end of June.

First Commercial's management of non-performing loans has attracted other domestic banks' attention.

Executive vice president of Chiao Tung Bank (交通銀行), Huang Feng-yi (黃豐一), said that he has sent colleagues to study First Commercial's grouping of impaired assets for auction.

"We are not opposed to emulating their method if it succeeds," Huang said.

Chiao Tung's Huang, however, was not very optimistic about the measure's feasibility, saying "it's usually hard to bargain for a good price at an auction and we are not sure who and where the buyers will be."

A market analyst, who declined to be identified, was even more pessimistic. A pundit from International Commercial Bank of China (中國商銀) said "AMCs are likely to start bidding as little as 10 percent of a loan's value, and the prices are not expected to climb much higher."

The recovery rate for banks on NPLs, if being auctioned in local courts, usually ranges from 30 percent to 50 percent of a loan's actual value.