Bank may be ready for major overhaul

By Frank Cho
Advertiser Staff Writer

Six months after Pacific Century Financial Corp. ended a nearly three-year global reorganization to streamline operations and raise profits, it faces a new pivotal time.

The company's new chairman and chief executive officer, Mike O'Neill, is scheduled to make an announcement tomorrow that could shift both the focus and executive power at the 103-year-old banking institution.

Since his arrival late last year, O'Neill has been crafting a "strategic assessment," a review of Pacific Century's global operations that will set the bank's long-term course.

While executives have declined to discuss specifics, analysts say the new plan — to be announced with the release of the bank's first-quarter earnings — will likely be more ambitious than the recently completed "New Era" campaign, which led to hundreds of layoffs and the closure of dozens of branches.

"There is probably going to be some restructuring announcement and large charge-offs, and I don't think the asset-quality problems are gone," said David Winton, a New York-based banking analyst at Keefe Bruyette & Woods Inc.

The bank has had to absorb millions of dollars in losses in recent years from bad loans and underperforming business operations around the Pacific. In its core market – Hawai'i – the bank has slipped to second in market share and has drawn the attention of federal regulators because of asset-quality problems.

"I am guessing they are selling their Asian offices as well as some or all of the banks they have in the South Pacific," said James Bradshaw, a banking analyst with D.A. Davidson & Co. in Portland, Ore.

If the bank does decide to dismantle its Pacific Rim strategy, analysts say it could bring the company enough money to cover losses in other areas and expected restructuring charges.

While few outside of Pacific Century's executive offices know what the bank will announce tomorrow, analysts say a slowing U.S. economy and lowering of economic forecasts in Asia will force difficult choices.

"It goes back to what is working and what is not," Bradshaw said.

"Folks are still convinced that he (O'Neill) is going to do the right thing and divest some the weaker elements of the business."