Bank of America
may sell local unit

Two isle banks investigate
a possible acquisition

By Rick Daysog
Star-Bulletin

Local banks are looking at acquiring Bank of America-Hawaii's retail banking operations, according to documents obtained by the Star-Bulletin.

Executives of American Savings Bank and CPB Inc., parent of Central Pacific Bank, met last month with Bank of America's local executives to review Bank of America-Hawaii's financial information as they investigated a potential buyout of the bank, according to a letter from CPB and American Savings executives to Bank of America officials.

Sources have said that other local banks have expressed an interest in buying pieces of Bank of America-Hawaii, which operates 39 branches statewide and has about 800 employees.

According to sources familiar with the current talks, the proposed deal is not expected to affect Bank of America's Honolulu Mortgage Co. unit, which the bank purchased earlier this year.

Bank of America executives in Honolulu and San Francisco declined comment, saying it's company policy not to respond to speculation.

Officials at American Savings, a subsidiary of Hawaiian Electric Industries Inc., and at CPB also declined comment.

However sources said no decision on a buyout has been made.

The proposed sale comes five years after BankAmerica entered Hawaii by buying Honfed Bank for about $165 million.

For the past year, Wall Street analysts had been forecasting that San Francisco-based parent company BankAmerica Corp. would sell its isle operations, which had performed below expectations.

Joseph Morford, banking analyst with Alex Brown & Sons Inc. in San Francisco, noted that BankAmerica is continuing to review its nationwide retail banking operations to maximize returns. Morford, who predicted in February 1996 that the banking giant would pull out of Hawaii and Alaska, said that Bank of America recently sold many rural California branches to cut costs.

Steve Didion, who covers CPB Inc. as an analyst with Hoefer & Arnett in San Francisco, said that while he wasn't aware of any deal, "for the way CPB wants to grow, this path probably makes sense."

He added: "The Hawaii market is better served by a local bank like CPB. Bank of America hasn't devoted a lot of resources to it."

During its time in Hawaii, Bank of America has faced numerous obstacles.

Last month, the company agreed to pay $39 million to customers who bought Investors Equity Life Insurance Co. annuities through Bank of America-Hawaii's predecessor Honfed Bank. Bank of America was sued by the state, which alleged that Honfed misled customers into believing the annuities were backed by the federal government.