First Commercial Bank (第一銀行), Taiwan's largest publicly traded lender by assets, said it will book a loss of NT$7.81 billion (US$224 million) on its recent sale of bad loans to Cerberus Asia Capital Management LLC.
The bank, which said in a statement it will write the losses off over five years, last month sold bad loans with a face value of NT$13.2 billion to Cerberus. The transaction was keenly watched by other Taiwanese lenders aiming to clean their balance sheets of about NT$1.64 trillion of bad loans after last year's recession.
"The recovery rate of about 40 percent is quite decent," said William Fong, a bank analyst at Primasia Securities Co, who earlier assumed a sale price of about 20 percent to 30 percent based on similar sales elsewhere in Asia. "If they had auctioned the assets themselves, they might have retrieved 50 percent, though that would take longer."
The March 27 sale, while critical to the bank's plans to clean NT$62 billion of bad loans from its books by June, won't necessarily set a precedent for other banks' sales, investors cautioned.
"The rate can only be a reference, as other sales would depend on the quality of the collateral," said Jerry Chen, who helps manage NT$4 billion at First Global Investment Trust Co (元大證券投信).
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