BancWest profits rise 14.3% in quarter
By Frank Cho
Advertiser Staff Writer
BancWest Corp., parent company of First Hawaiian Bank, said yesterday that higher fee and interest income helped drive its first-quarter operating profits up 14.3 percent, easily topping Wall Street expectations.
But the earnings report also noted that asset-quality problems and a slowing Mainland economy are beginning to affect the state's largest financial services company.
BancWest's profit from operations rose to $56.5 million, or 51 cents a share, compared with $49.4 million, or 40 cents, in the year-earlier quarter.
After an after-tax gain of $24.6 million from the sale of the company's interest in Star Systems Inc., and $2.4 million of integration costs related to the acquisition of 30 bank branches in New Mexico and Nevada, BancWest reported net income of $61.8 million, or 49 cents a share, compared with $49.4 million, or 40 cents, for the quarter ended March 31.
That exceeded analysts' expectations of 45 cents to 46 cents a share.
"Despite the unusual items recorded during the quarter, the bottom line is that our operating earnings continue on a solid track of double-digit growth, and our latest acquisitions have operationally come on line smoothly," said Walter Dods, chairman and chief executive officer of the Honolulu bank holding company.
Dods said the company increased its provision for loan losses 173 percent during the first quarter to $35.2 million, up from $12.9 million in the same quarter a year ago.
"We believe that increased loan loss provision this quarter is necessary and prudent given the continued concern about the economic slowdown nationally and in California," Dods said.
The company said it is also worried about agricultural lending in the Pacific Northwest and the purchase of additional loans with branches in New Mexico and Nevada.
"They (BancWest) are experiencing what a lot of large banks are these days with asset quality," said David Winton, a New York-based banking analyst with Keefe Bruyette & Woods Inc.
BancWest has enjoyed several quarters of record earnings, but by raising its reserves to be more inline with its peers, Winton said, the company is sending a signal that it is concerned about the effect the economy is having on asset quality.
Nonperforming assets rose to $128.7 million, or 0.9 percent of loans and foreclosed properties.
That is slightly higher than the 0.86 percent at the end of December, but still better than the 0.96 percent it posted a year ago.
The increase in nonperforming assets came after the bank put a $12.7 million commercial credit to a West Coast franchise operator on nonaccrual status at the end of last quarter.
Net charge-offs rose to 0.61 percent during the quarter from an annualized rate of 0.37 percent, partly because of several charge-offs on agricultural loans in the Pacific Northwest.
Total assets rose 10.8 percent to $19.4 billion. Loans were up 10.5 percent to $14.2 billion and deposits increased 10.4 percent to $14.7 billion.
Overall, revenues rose 7.5 percent during the quarter, exclusive of one-time gains.
Net interest income rose 5.6 percent over the same year-earlier quarter and non interest income rose 14.3 percent from the same quarter a year ago.
The company released its earnings after the close of the market. Its shares closed yesterday at $24.33, down 28 cents.
