Bankoh gets boost from Visa IPO

Bank of Hawaii Corp. said yesterday its net income will increase by $7 million to $9 million in the first quarter after a mandatory redemption of some of the 900,000 shares it owned in Visa, and the selling of the bank's interest in an aircraft lease.

The bank took a $5.6 million litigation charge in the fourth quarter pertaining to antitrust lawsuits filed against the credit-card company. Bankoh was expecting to be repaid for its share of Visa's settlement costs after the company went public. Visa raised $17.9 billion on March 19 in a record U.S. initial public offering.

Bank of Hawaii declined to break out the amounts generated from the Visa and aircraft lease transactions ahead of the company's release of earnings on April 21.

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Bank of Hawaii Corp. said its net income will jump by $7 million to $9 million in the first quarter after a mandatory redemption of its Visa stock and the sale of its equity interest in an aircraft lease.

The state's second-largest bank in terms of assets said it will use the proceeds to accrue employee incentives, pay a predetermined cost to allow the company to retire early some of its most expensive debt, and make a contribution to the Bank of Hawaii Charitable Foundation.

Bankoh also said it is increasing its allowance for loan and lease losses to reflect increased risk in its commercial leasing and consumer portfolios. The bank didn't specify the increase of its loan-loss provision, but in the fourth quarter it set aside $5.4 million as a provision for potential loan losses.

The bank's net income in that quarter fell 19.7 percent after taking a $5.6 million litigation charged related to its membership in Visa and a 74 percent increase in its loan-loss provision.

The Visa charge pertained to antitrust lawsuits filed against the credit-card company. Visa used the proceeds to help defray the costs of a $2.25 billion settlement that it and its member banks reached with American Express Co.

American Express and other parties, whose suits are still pending, had sued Visa after the U.S. Supreme Court ruled in 2004 that it violated antitrust laws by preventing member banks from offering competitors' cards.

Similar charges were taken by dozens of member banks, which were to be repaid for their share of Visa's settlement costs after the company went public.

The credit-card company raised $17.9 billion on March 19 in a record U.S. initial public offering.

First Hawaiian Bank, the state's largest bank, also owns shares of Visa through its credit-card membership, but a spokeswoman for the bank said she wasn't immediately able to determine the number of shares.

Al Landon, chairman and chief executive of Bank of Hawaii, declined to break out the amounts generated from the Visa and aircraft lease transactions ahead of the company's release of first-quarter earnings on April 21.

In its year-end financial filing with the Securities and Exchange Commission, Bankoh disclosed it owned 900,000 shares of Visa restricted stock that it received in exchange for the bank's membership interests.

A portion of the shares were converted into common stock while the remaining amount was turned into Class B stock that the company is prohibited from selling for three years. The bank said it was required to sell a portion of its shares but declined to elaborate on how much it sold or the amount it still retains.

Bankoh also declined to elaborate on the money it received from its aircraft lease. In its year-end filing, Bankoh said it had 10 leverages aircraft leases in its commercial portfolio that were originated in the 1990s or before and that its credit exposure from those leases was $88 million as of Dec. 31, 2007.