Unionbancal said profits fell 32%, to $107.3 million, because of higher loan loss provisions.

Earnings per share, excluding one-time gains and charges, were 62 cents a share, in line with the consensus of Wall Street analysts.

The San Francisco-based banking company, which is majority owned by Bank of Tokyo-Mitsubishi, said non-performing assets rose 7.5%, to $439 million from the fourth quarter and nearly tripled from the first quarter last year. The company said this quarter's non-performing loans include its exposure to Pacific Gas and Electric Co., the California utility - a unit of PG&E Corp. - that filed for bankruptcy protection earlier this month.

At the same time, the company announced it would exit the automobile leasing business, which has been an albatross on several banks' earnings for the last few quarters. Unionbancal's auto lease portfolio, totaling $620 million, would be allowed to wind down as existing leases expire.

The company said the decision to exit the auto leasing business is due to a "weak" car market, resulting in higher residual write-downs than anticipated. The first quarter includes residual write-downs of $17.3 million, the equivalent of 7 cents per share, and an additional charge of $1.7 million.

Total loans charged off in the quarter were $72 million and the provision for credit losses was $100 million.

"Although our non-performing assets, provision, and charge-offs remain at elevated levels, we are encouraged that the steps we have taken to arrest the deterioration in our portfolio are beginning to show results," said Takahiro Moriguchi, president and chief executive officer, in a statement.

"A significant decline in provision expense should drive a healthy increase in operating earnings per share" for the full year, Mr. Moriguchi said.

Fee income rose 8.2%, to $160.1 million, over last year, excluding a $20.7 million gain from the sale of the company's interest in Star Systems Inc.

Deposit fees rose 20%, mainly because of a new fee structure put in place last year, the company said. Merchant processing transaction fees rose 12% on higher volume. Merchant banking fees declined 35% because of reduced loan syndication activity, the company said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.