A major shareholder in the parent of Webster Bank is urging the Waterbury-based lender to spin off its health savings account business, now the largest in the country.
In a post on its website Monday, Kerrisdale Capital said Webster Financial Corp.'s HSA Bank unit could be worth $17 a share as a stand-alone company.
"These HSAs — tax advantaged deposits tied to high-deductible health plans and used to pay for a wide range of qualified expenses — have exploded in popularity as employers and policy-makers search for ways to restrain health spending," the post stated. "HSA Bank has been at the forefront of this trend ... ."
The post also noted: "Today with more than $4 billion under management and approximately 15-percent market share in a sector that is forecast to more than triple in size over the next several years, HSA Bank is poised for even greater success."
Kerrisdale owns about 2 percent of Webster's outstanding shares.
Shares in Webster rose 43 cents, to $34.96 in mid-morning trading on the New York Stock Exchange.
In its earnings report for the fourth quarter, Webster noted a 19 percent increase in its health savings account business compared with a year earlier. Webster entered the business in 2004, buying a small bank in Wisconsin whose health savings accounts had about $100 million deposited in them at the time.
As of Dec. 31, Webster had $2.6 billion in deposits and brokerage balances in its health savings account business, a lucrative source of fee income and another source of deposits to fund increasing lending.
In January, Webster completed the acquisition of JPMorgan Chase's health savings account business, adding $1.3 billion in deposits.
In a filing with regulators Monday, Webster said the bank has considered "strategic options," including a spinoff over the years, "and have consistently found that it is best situated inside Webster."
Not only are the deposits a stable source of funding for lending, there are "cross-selling opportunities" with HSA clients for other Webster products and services that "are available only if HSA Bank remains under Webster's control."
In a note to investors Monday, Collyn Gilbert, an analyst at Keefe, Bruyette & Woods Inc., said the push by Kerrisdale for the spinoff only highlights the strength of Webster's health savings account business.
Gilbert noted that the health savings account business has played a key role in KBW's bullish outlook for Webster's shares "as it provides an extraordinary, low-cost funding option where future costs are likely to come under increased pressure.