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B of A Sells Off Branch Network in Hawaii

Banking: Deal with American Savings signals retreat from expansion into islands adrift in a stagnant economy.

May 28, 1997|From Bloomberg News

HONOLULU — BankAmerica Corp. is leaving the consumer and commercial banking business in Hawaii by selling its branch network to American Savings Bank, a unit of Hawaiian Electric Industries Inc., for an undisclosed price.

The addition of Bank of America, the state's fourth-largest bank, with $1.8 billion in assets, would give American Savings $5.4 billion in assets and 39 more branches and strengthen its position as Hawaii's third-largest bank.

The sale also represents a retreat from the islands for BankAmerica, five years after it expanded into Hawaii--just as the local economy began to stagnate, analysts said.

"The investment required to improve the profitability of our Hawaii unit could be put to better use for our shareholders in other areas," Michael O'Neill, BankAmerica's chief financial officer, said in a statement.

San Francisco-based BankAmerica, the third-largest U.S. bank, bought HF Holdings Inc., parent of Honfed Bank, in Hawaii in 1992 and added Liberty Bank in 1994.

BankAmerica said it will retain Honolulu Mortgage Co., a nationwide mortgage lender that it acquired in March from HomeSide Lending Inc., as well as its merchant credit card services and community-development businesses in Hawaii.

The banks said the transaction is expected to close in the fourth quarter of this year or the first quarter of 1998.

BankAmerica shares fell $3.375 to close at $114.25 in below-average trading of 1.21 million shares on the New York Stock Exchange. Hawaii Electric fell 12.5 cents to close at $34 in trading of 97,700 shares, twice its daily average.

The sale is consistent with the bank's strategy of abandoning less profitable businesses, reinvesting the capital in other areas or distributing funds back to shareholders through boosted dividends or share buybacks.

"This isn't a surprise by any means," said David Winton, an analyst with Keefe, Bruyette & Woods Inc. "They've talked about this as a business that didn't cut the mustard."

Tourism and frenzied sales of real estate to Japanese buyers sent the Hawaiian economy soaring in the 1980s. It stagnated soon after BankAmerica arrived.

"It's been at a standstill, and it's not growing as fast as the rest of BankAmerica's states," Winton said. "They bought at the height of the market."

The bank has told analysts the sale will free up $150 million in capital, Winton said.

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