(The following statement was released by the rating agency)
Oct 10 - Fitch Ratings has affirmed BancWest Corporation's (BWE) Long-termIssuer Default Rating (IDR) at 'A'. The Rating Outlook on the Long-term IDR isStable. Fitch has also affirmed the ratings of the subsidiary banks, Bank of theWest (BOW) and First Hawaiian Bank (FHB). A full list of rating actions followsat the end of this release.
Today's rating action on BWE was taken in conjunction with Fitch's GlobalTrading and Universal Bank (GTUB) review. As part of this review, the IDRs ofBNP-Paribas
(BNPP), BWE's ultimate parent, were affirmed at 'A+/F1+'.
RATING ACTION AND RATIONALE
The IDRs of BWE and its subsidiary banks are linked to that of their 100% owner,BNPP. Fitch believes that BWE is a strategically important subsidiary to BNPPbecause of the strong propensity and ability to support and explicit capitalsupport that has been provided to BWE.
The viability ratings of the subsidiary banks reflect better asset quality, asolid customer funding base, and stronger capitalization. Profitability has beenpressured by a reduced net interest margin in a low interest rate environmentbut has benefited from lower impairment charges and an improved operating coststructure.
Because of a regulatory capital exemption (expiring in 2015) at the holdingcompany due to its ownership, BWE has historically operated with weak equitymeasures. During June 2012, BNPP injected $2.2 billion in common equity intoBWE; the cash proceeds were used to repay short-term debt owed to the parent andother affiliates. BWE's Fitch Core Capital Ratio improved to 9.90% at June 30,2012 from 5.72% at Dec. 31, 2011 with regulatory capital measures similarlygrowing. In addition to owning 100% of BWE, BNPP holds the vast majority ofoutstanding debt. Management anticipates that BWE will exceed all regulatorycapital standards through retained earnings but has not ruled out conversion ofmore debt to equity.
Since peaking at end-2010, non-performing assets (including accruing TDRs) haveimproved to 2.29% of gross loans and foreclosed property at June 30, 2012 withmost of the improvement coming at Bank of the West. First Hawaiian Bank's assetquality has been historically very good. Reserve coverage similarly improved to75% at BWE. Net credit losses declined measurably to 0.67% of average loans (onan annualized basis) for the first half of 2012 compared with 1.01% in 2011.
BWE's return on assets grew to 0.79% (annualized) in the first half of 2012compared with 0.67% in 2011 as weaker margins were offset by lower impairmentcharges. Part of new provisions during the most recent period was associatedwith the transfer of a portion of non-performing loans held for sale. BWEbenefited from modest gains on sale of securities and a reduction in operatingcosts in the first half of 2012.
RATING DRIVERS AND SENSITIVITIES - IDRs and VRs
The IDRs of BWE and its subsidiaries are linked to that of BNPP. Should the IDRof BNPP be upgraded, it is likely that the IDRs of BWE would be upgraded. Sincethe IDR of BNPP is at its Support Rating Floor and has a Stable Outlook, it willnot likely be downgraded unless the ability or propensity to support of theFrench sovereign diminishes. Although not viewed as likely in the near term, ifBWE becomes less strategically important to BNPP, its IDR could be downgraded.
Fitch believes that the VRs have limited upside in the near term. However,continued strengthening of capital at the holding company, consistent creditimprovement and sustained earnings commensurate with higher rated peers couldpositively affective the VR in the medium term. Conversely, negative pressure onthe VR could occur should current positive credit trends materially reverse andcredit losses escalate and/or core earnings deteriorate from current levels.
BancWest Corporation had $78.7 billion in total assets at June 30, 2012 withover 700 offices in the Western United States, principally in California andHawaii.
The following ratings have been affirmed:
BancWest Corporation--Long-term IDR at 'A'; Outlook Stable;--Short-term IDR at 'F1';--Support Rating at '1'.Bank of the West--Long-term IDR at 'A'; Outlook Stable;--Short-term IDR at 'F1';--Viability rating at 'a-';--Support rating at '1';--Long-term deposits at 'A+';--Short-term deposits at 'F1'.First Hawaiian Bank--Long-term IDR at 'A'; Outlook Stable;--Short-term IDR at 'F1';--Viability rating at 'a-';--Support rating a '1';--Long-term deposits at 'A+';--Short-term deposits at 'F1'.
Additional information is available at '
'. The ratings abovewere solicited by, or on behalf of, the issuer, and therefore, Fitch has beencompensated for the provision of the ratings.
Applicable Criteria and Related Research:--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012).
Applicable Criteria and Related Research:Global Financial Institutions Rating CriteriaRating FI Subsidiaries and Holding Companies(New York Ratings Team)