Merger, Asia
hit Bankoh earnings

It warns of a 'nominal'
quarterly net profit

By Russ Lynch
Star-Bulletin

Second-quarter earnings at Pacific Century Financial Corp. will be cut by about $27 million as it writes off bad loans in Asia and takes additional expenses incurred in its merger of its savings and loan unit into its Bank of Hawaii subsidiary.

Loan write-offs will result in net charges of $14 million in Thailand and $3 million in Indonesia and the result of all the extra expense provisions will be a "nominal net profit" for the quarter ended June 30, the company said yesterday.

In the second quarter of 1997, Pacific Century had a profit of $35.6 million, or 89 cents a share. The latest quarter's final results are not expected until later this month.

Pacific Century said it does not plan to reduce its 161/4-cent quarterly dividend.

The bank-holding company had already begun some write-offs last year in connection with its business in Asia, taking a $10.4 million write-off in Thailand in the last quarter.

The company said it has increased its provision for loan losses to about $42 million, a 130 percent increase from $18.3 million in the first quarter.

Other expenses announced yesterday included a $19.4 million restructuring charge from the merger of First Federal Savings & Loan Association into Bank of Hawaii and from the merger of two mainland banks.

The company has said it expects to cut costs in the future because of the mergers, saving about $22 million a year, but meanwhile has to take a charge for the expenses.

Up to 25 branches will be closed in Hawaii over the next two years, some from the savings and loan and some from the bank, to eliminate redundancy as First Federal branches become Bank of Hawaii branches.

Lawrence M. Johnson, chairman and chief executive officer, said Pacific Century's provision for the Asia losses is consistent with the company's conservative credit philosophy and "addresses the identified credit quality issues in our Asia portfolio."

Johnson said Pacific Century remains confident in the long-term potential of its strategy in the Pacific and in the future of its four markets -- Hawaii, the mainland, Asia and the South Pacific.