Bailout boosts isle bank stocks

Hawaii's commercial bank stocks soared in the past two days in the wake of a multibillion federal government bailout of bad debt carried by the nation's financial institutions.

BANKING BONANZA Hawaii bank stocks have bounced back convincingly the last two days after the Bush administration said it would buy hundreds of billions of dollars of bad mortgages and other debt of U.S. financial companies. Bank Yesterday's close 2-day point gain 2-day% gain Central Pacific $20.75 +$6.81 +48.9% Bank of Hawaii $70.00* +$15.30 +28.0% First Hawaiian **$67.70 +$12.20 +22.0% Hawaiian Electric ***$28.40 +$1.90 +7.2% * All-time high ** Numbers reflect results from its publicly traded parent company, Paris-based BNP Paribas SA *** Owns American Savings Bank

"It's really consumer confidence ... with the government bailout of different loans (to) stabilize the market, it adds up in the stock prices," said Alvin Sakamoto, executive vice president of finance at American Savings Bank. "Everyone was hoping and looking for some good news - and that was some good news for the market."

A Securities and Exchange Commission ban on short sales - a trading method that bets the value of the stock will go down - was a primary driver of boosting stock sales for both mainland and local banks, according to a San Francisco analyst at Keefe, Bruyette & Woods.

However, Hawaii's banks likely will be unaffected by the unprecedented federal bailout since the institutions for the most part do not have the same problems that many mainland investment and commercial banks are experiencing, said Don Horner, chairman of the Hawaii Bankers Association and chief executive of First Hawaiian Bank.

"One must differentiate between main street and Wall Street," Horner said. "Clearly there's been significant changes in Wall Street, but given the stability of our local banking community, we're really unaffected because we didn't have exposure to the speculative real estate market and subprime lending. The banking community in the state remains safe and sound."

For the most part, local banks have steered clear of the credit crisis at the heart of the nation's financial meltdown. For instance, the average mainland bank had 10 times more non-performing assets than Hawaii banks, he said.

However, Central Pacific Bank, whose stock skyrocketed by nearly 50 percent in the past two days, or $6.81 to $20.75, has been plagued by its exposure to the slumping California residential construction market. As a result, the bank posted a staggering $146.3 million loss in the second quarter.

Dean Hirata, Central Pacific's vice chairman and chief financial officer, said it is too early to tell what effect the government's plan will have on local banks.

"However, the plan does provide additional alternatives to reduce our non-performing assets," he said.