Spinout of banking unit could be best option for embattled Hawaiian Electric

By Author Alex Graf, Syed Muhammad Ghaznavi

Questions are swirling about American Savings Bank FSB’s future as its parent company Hawaiian Electric Industries Inc. faces mounting lawsuits. As the only bank in the country owned by a publicly traded utility company, American Savings Bank is in an unprecedented position as its parent company Hawaiian Electric comes under pressure following fires that devastated the town of Lahaina….”Without downstreamed parent-company cash in hand to protect it from the utility’s travails, the insured depository and thus the FDIC are sure to suffer,” Karen Petrou, the co-founder and managing partner at Federal Financial Analytics, wrote in a recent blog post. The bank had $8.21 billion in total deposits at June 30, and $1.75 billion of those were uninsured, according to S&P Global Market Intelligence data. In the press release, American Savings Bank touted its liquidity and capital position, and assured customers that their deposits are safe. The bank has 273% of liquidity coverage for its uninsured deposits and a common equity Tier 1 ratio of 12.23%. It also has borrowing capacity of $3.1 billion from the Federal Home Loan Bank and Federal Reserve, according to the press release. Banking regulators are also in a precarious situation because they do not have oversight of Hawaiian Electric like they do for most bank holding companies. When a parent company is a bank or savings and loan holding company, the Federal Reserve can ensure the parent is a “viable source of strength” before problems emerge, Petrou wrote. “When the parent is a nonbank, this is harder,” Petrou wrote. “Insured depositories at the beck and call of commercial or nonbank financial companies will be cash cows for parent companies milked dry ahead of the FDIC.”