UPDATE 2-HK's Bank of E.Asia books $183 mln for CDOs,other items

(Adds details, analyst comment and background)

By Kennix Chim

HONG KONG, Feb 15 (Reuters) - Bank of East Asia Ltd (0023.HK), Hong Kong's fifth-largest lender by assets, booked revaluation and impairment losses totalling HK$1.42 billion ($183 million), largely for its holdings in collateralised debt obligations battered by the U.S. subprime mortgage meltdown.

The lender, which met forecasts with a 21 percent rise in second-half earnings despite higher operating costs, said its exposure to CDOs after the writedown totals about $560 million.

Analysts expect further writedowns.

"The bank initially held $700 million in CDOs, but due to current bearish market sentiment, we wrote down 20 percent of that," Daniel Wan, the bank's chief financial officer, said on Friday after it released its 2007 results.

Goldman Sachs had forecast the company would mark down the value of those holdings by 15 percent for the second half of 2007 and a further 15 percent for the first half of this year.

"I am confident that within one to two years, U.S. capital markets will come back to normal and we would be able to capture the loss back," said David Li, chairman of Bank of East Asia.

Bank of East Asia reported a net profit of HK$2.26 billion for the second half of 2007, based on Reuters calculations, versus HK$1.87 billion in the same period of 2006, thanks to higher fee and commission income. A poll of 21 analysts by Reuters Estimates had forecast a profit of HK$4.12 billion in 2007 or HK$2.25 billion in the second half.

In addition to a $147 million mark-to-market loss on financial instruments -- mostly CDOs -- Bank of East Asia booked impairment losses for the year of HK$395 million, nearly double the year-earlier total, including HK$270 million for structured investment vehicles (SIV).

"Due to the deteriorating U.S. subprime market, Bank of East Asia is expected to make further provisions or writedowns in first half, but the amount will be less than last year," said Anthony Lok, an analyst at BOC International.

Standard & Poor's estimates that the total exposure of Asian banks to structured derivative instruments is about $34 billion -- only 10 perent of their equity and far less than their U.S. and European peers.

Shares in Bank of East Asia, which is nearly 9 percent held by Spain's Criteria Caixa Corp (CRIT.MC), were down 19 percent this year through Thursday, compared with a 13.6 percent drop in the benchmark Hang Seng Index .HSI amid a rout in global equity markets.

The shares were down a further 5 percent on Friday before the results report, and ended 3 percent lower at HK$41.65. (US$1=HK$7.8) (Reporting by Kennix Chim; Editing by Anne Marie Roantree)