Posted on: Monday, April 23, 2001

Bankoh parent to unload non-Hawai'i operations

By Frank Cho
Advertiser Staff Writer

Pacific Century Financial Corp. unveiled a sweeping reorganization plan today that calls for the sale or closure of nearly all of its operations outside the state and a renewed focus on Hawai'i.

The company also said it plans to ask shareholders to change the company's name to Bank of Hawaii Corp. to better reflect its new focus.

While roughly 1,000 jobs are to be lost in the restructuring and sale of operations, the effect on Hawai'i is expected to be limited.

The company's new chief executive officer, Michael O'Neill, made the announcement detailing dozens of changes and strategies this morning in a meeting with analysts in New York.

For sale are Pacific Century's California subsidiary, Pacific Century Bank; dozens of South Pacific branches in French Polynesia, New Caledonia, Papua New Guinea, the Solomon Islands, Vanuatu and Fiji; and five branches and three offices in Asia, all outside of Japan.

"The decision to divest, while necessary, was certainly difficult since the company has served these regions for many years and has strong historical ties," O'Neill said.

The moves come as the Honolulu-based bank holding company and parent company of Bank of Hawaii seeks to regain its financial footing after three years of falling profits from underperforming operations around the Pacific. Many analysts who expected the bank to sell some of its far-flung operations applauded today's announcement.

"It is what I was hoping for," said James Bradshaw, an analyst with D.A. Davidson & Co. in Portland, Ore. "I think now that they will spend some energy and capital rebuilding their growth in Hawai'i."

Investors also greeted the news positively, sending the bank's share price up 94 cents to $22.10. Trading volume was heavy at 663,900, nearly double its average daily trading volume of 345,000.

The decision to dismantle its Pacific Rim franchise comes just five months after the company hired O'Neill, a former Bank of America executive, to improve its financial performance. Pacific Century had suffered through several quarters of falling profits and increasing asset-quality problems that indirectly forced former chief executive officer Larry Johnson into retirement.

The restructuring, which has been in the planning stages for four months, starts immediately and runs through 2003, O'Neill said.

For sale are Pacific Century's California subsidiary, Pacific Century Bank, which has 19 branches, mostly in Southern California, representing $1.1 billion in assets and $1.3 billion in deposits. Analysts estimated its sale could bring as much as $175 million.

"I think there is going to be a lot of interest in the California property. If there are a lot of bidders, then that figure could rise," said Joe Morford, a San Francisco-based bank analyst with Dain Rauscher Wessels.

Also for sale are dozens of branches in French Polynesia, New Caledonia, Papua New Guinea, the Solomon Islands, Vanuatu and Fiji in the South Pacific, where political, social and economic stability has been a problem for the company.

In Asia, the bank plans to sell five branches and three offices, all outside Japan.

O'Neill said he will begin marketing the businesses for sale this week and expects to announce a buyer for the California subsidiary by the end of the second quarter. O'Neill said the South Pacific banks may take longer to sell, and operations in Asia may have to be closed if a buyer cannot be found.

In addition to the Hawai'i franchise, O'Neill said the bank will keep two branches in American Samoa and a representative office in Japan for strategic reasons.

O'Neill has wasted little time dealing with Pacific Century's problems. Since being hired last Nov. 3, he has sold the company's credit card portfolio for $75 million, hired three new vice chairmen, unloaded several underperforming branches in Arizona and planned the biggest shake-up in the company's history.

Richard Dahl, the company's chief operating officer and president of the Bank of Hawaii, will oversee the sale of assets. The divestitures are expected to free up to $800 million in capital for the bank to reinvest in its operations. Most of that money will likely be used in a stock buyback program that has yet to be approved by federal regulators.