First Commercial Bank expects to post first loss

First Commercial Bank (第一銀行), Taiwan's largest publicly traded lender by assets, expects to post a loss of NT$28 billion (US$815 million) for this year, its first annual loss, Executive Vice President Chang Yi-hsiung (張義雄) said.

The lender, which earlier said it would sell NT$62.2 billion of bad loans by June, may extend the deadline by a month, as it needs time to readjust the one-time charge it will take, Chang said. First Commercial earlier planned to spread its write-offs over five years.

"After the write-off, our earnings will only get better, not worse," Chang said.

First Commercial and its rivals, such as Chang Hwa Commercial Bank (彰化銀行), are forecasting losses as they accelerate bad-loan write-offs amid a government push to clean up an increasingly deregulated industry.

Taiwanese banks' average non-performing loan (NPL) ratio climbed to a record 11.74 percent, or NT$1.68 trillion, at the end of March amid rising unemployment and financial troubles for businesses, the central bank said Tuesday.

First Commercial said it will pare its non-performing loan ratio to about 3 percent from 8.2 percent as of April after the planned bad-loan sales.

The lender, which had net income of NT$3.15 billion last year, sold NT$13 billion in collateral from non-performing loans in late March to Cerberus Asia Capital Management LLC after its first auction.

The US-based Cerberus, a unit of Cerberus Partners LP, has decided to form an asset-management company with Taiwan Securities Co (台証證券) to seek investment opportunities among the country's NT$1.68 trillion in troubled loans.

First Commercial also sold another US$131 million of troubled assets to a unit of Lehman Brothers Holdings Inc in April. The remaining bad loans will be sold through another auction, initially expected by June, according to Huang Shiu-nan (黃秀男), vice president of First Commercial.

PricewaterhouseCoopers LLP is First Commercial's adviser in the auctions.