Banker sees growth if there's no war

By Frank Cho
Advertiser Staff Writer

The stage is set for Hawai'i's economy to expand this year, but a war in Iraq could derail or at least postpone that expansion, one of the state's top bankers told business leaders yesterday.

Don Horner, president and chief operating officer of First Hawaiian Bank, said historically low interest rates, a stable real estate market, and improving tourism numbers clearly indicate Hawai'i is ready for growth.

But what is not clear is how deep and how long a war in Iraq would affect Hawai'i's economic future.

"Overall, our bank anticipates growth in 2003," Horner told a meeting of the Honolulu Rotary Club yesterday in Waikiki. "Of course, if we have a protracted war — this will create a period of uncertainty and that will have a negative impact on investment and tourism."

Horner, who runs the $9 billion First Hawaiian Bank, told the Rotarians that the three things driving the Hawai'i economy are tourism, tourism and tourism.

Given tourism's annual revenues of roughly $10 billion, Horner was only half joking.

This year, the state is projecting visitor arrivals to rise 6 percent and spending to increase by 7.5 percent.

"Consumer confidence ... we expect to be very solid in 2003. As an example of consumer confidence, automobile sales in 2002 were one of the best in the last 10 years and projections for 2003 are very strong," Horner said. "Delinquencies and bankruptcies are all trending down in Hawai'i, which is an encouraging sign."

An influx of deposits has also strengthened the balance sheets at most local financial institutions.

"The banks in Hawai'i are extremely liquid, which means they have plenty of money to lend to help economic expansion," said Horner, noting that First Hawaiian had $1 billion of excess capital on its balance sheets that it is ready to lend. Horner said he's also seeing renewed investment from outside the state.

"We are seeing what we like to call smart money coming to Hawai'i," Horner said. "These are investors who have an eye towards growth rather than an eye towards speculation."

He highlighted relatively recent deals such as the Federated Stores purchase of Liberty House and General Growth's $250 million acquisition of Victoria Ward Ltd. and its Kaka'ako properties.

"They (General Growth) are long-term players," Horner said. "It is good news to have that kind of investment in Hawai'i."