Bloomberg News

HONOLULU - Pacific Century Financial Corp., the parent of Bank of Hawaii, said bad loans will all but wipe out second-quarter earnings, becoming the third U.S. banking company in a week to issue such a profit warning.

The Honolulu company's shares dropped 17.98% to $16.25.

Pacific Century said it will set aside an additional $55 million to $65 million to offset bad loans and increase its provision for possible future bad loans. The charges will result in "nominal" earnings for the second quarter, it said.

"It's not good," said Jacqueline Reeves, an analyst at Putnam, Lovell, de Guardiola & Thornton. "This provision will essentially wipe out earnings."

Analysts in a First Call/Thomson Financial survey were expecting the company to post second-quarter earnings of 51 cents per share. Ms. Reeves said she cut her estimate to about 5 cents a share.

In the second quarter of 1999 the company earned $38.5 million, or 47 cents a share. The allowance for loan losses was $13.9 million.

An increasing number of borrowers are failing to repay loans amid an economic slowdown that follows a yearlong rise of interest rates. That has prompted banks to begin writing off bad loans and boost provisions to cover future losses.

Unionbancal Corp., California's second-largest banking company, and Wachovia Corp., the No. 3 banking company in the Southeast, both said last week that bad loans would hurt their profits.

Most of Pacific Century's writeoffs and provisions stemmed from bad commercial real estate loans in Hawaii and syndicated loans, chairman and chief executive Lawrence M. Johnson said in a recorded statement.

The writeoffs also cover recent political and economic turmoil in Fiji, where Bank of Hawaii has three branches, the company said.

Pacific Century has offices from Singapore to New York and focuses on Hawaii, the Pacific Rim, and the western U.S. mainland.

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