Pacific Notes
Notes from the Pacific
Bankoh Retreats
From The South Pacific
For much of the past two decades, Bank of Hawaii proudly branded itself as the “Bank of the Pacific.” Its system of branches stretched from Guam in the western Pacific to Australia in the South Pacific and Tahiti in the eastern Pacific. No more.
In late April, only five months after taking office, the bank’s chairman and chief executive officer ordered a full-scale retreat from the South Pacific, Australia, most of Asia and Southern California. The bank, said Michael O’Neill, would be Hawaii-focused and, as a result, forecast significantly greater profits, return on equity and overall shareholder value. To make his point, O’Neill said the bank’s holding company, Pacific Century Financial Corp., would be renamed Bank of Hawaii Corporation, a name that recalled the holding company’s former moniker, Bank Corp. Hawaii.
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Bank of Hawaii will divest itself of holdings in six Pacific Island nations: Fiji; French Polynesia; Vanuatu; New Caledonia; Solomon Islands; and Papua New Guinea. Earlier this year, it sold its minority stakes in banks in Samoa and Tonga. The bank will shed its significant although minority stake in Australia’s Bank of Queensland.
The bank will also divest its operations in Asia, save for a small office in Japan, and a suburban banking group in Southern California. About 1,000 jobs will be lost as a result of the divestiture program.
However, O’Neill didn’t order a full-scale withdrawal from the islands. The bank will continue to operate branches in Guam, the Common-wealth of the Northern Marianas; Palau; Federated States of Micronesia; Marshall Islands; and, American Samoa. All, of course, are U.S. dollar denominated countries or territories, and all have banking laws based on U.S. regulations.
“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 when the bank’s new strategic vision was announced. “Although financial projections for these businesses forecast improvement, current and expected returns were insufficient when compared to those in Hawaii and the West Pacific.”
O’Neill was brought in last November to shore up Bank of Hawaii’s sluggish economic performance. (See www.hawaiibusiness.cc , February 2001 issue.) Once Hawaii’s largest financial services company, Pacific Century Financial Corp. was hit hard by the near decade-long slowdown in Hawaii during the 1990s, the collapse of Asian financial markets in the late 1990s, and last year’s coups in Fiji and the Solomon Islands. When O’Neill, who helped turn around Bank of America, took over Pacific Century Financial, the company’s share price had fallen to about $11.
The financial markets have responded to O’Neill’s refocusing of the company, and to his well-deserved reputation for turning around ailing financial institutions. By late April, BOH was trading at about $22.
Under O’Neill’s plan, the refocusing of Bank of Hawaii will be completed by 2003. This year, the focus will be on divesting itself of its non-core assets, such as the South Pacific system. The bank is forecasting that, by 2003, it will have total assets of about $9 billion, down from its current $14 billion. That would put it in second place among Hawaii’s financial institutions. But more importantly, core net income is expected to rise from its current $119 million to $131 million.
What happens next? There’s considerable speculation in both the Hawaii market and among analysts who Pacific Century that O’Neill is preparing Bank of Hawaii for sale. O’Neill downplays such speculation, pointing again to his mission of bolstering the bank’s lagging stock price.
The reality is that if there is a suitor, it ought to make its move now. If O’Neill’s cost-savings and refocusing succeed, the bank’s share price in two years can be expected to be much higher. But there’s also the question of what will a suitor be buying? It would be purchasing a large financial franchise in a relatively small regional banking market, a market that has seen far slower growth over the past 10 years than comparable areas on the U.S. mainland.
For now, Bank of Hawaii is pushing to complete the divestment process by the end of this year. The thankless job has been assigned to Bank of Hawaii President Richard Dahl, a key architect of the now discredited expansion strategy.
—Floyd K. Takeuchi
Americans Charged For Money-Laundering, Fraud
The president of the defunct Private International Development Bank (PIDB) of American Samoa, William Hugh Cravens, was arrested at his home in La Jolla, California in April in connection with a mainland investment scheme that reportedly bilked $74 million from 2,500 investors. Cravens, a former resident of American Samoa, and four others are charged with mail and wire fraud, money laundering and conspiracy. Others indicted include John Zidar, John Mathews, Elizabeth Phillips and Steven Moreland.
According to the 50-page indictment, Cravens not only established and controlled the Private Inter-national Development Bank (PIDB) of American Samoa but he also established bank accounts in Apia. Cravens is a former president of the Polynesian Cultural Center in Hawaii and a former chairman and president of the Development Bank of American Samoa.
The indictment said from 1997 to 2000, the defendants promised a return of 120 percent annually to people who invested in a series of dubious funds called Vista Inter-national, Oakleaf International and Rosewood International. The indictment said none of the ventures were successful, and many resulted in a total loss, including a $300,000 investment in an Ecuadorian
gold mine.
—Fili Sagapolutele
UOG Hosts Pacific Science Congress
The Pacific Science Association and the University of Guam will co-host June 1-6 at the Hilton Guam Resort & Spa the 10th Pacific Science Inter-Congress, a prestigious academic convention held every four years. PSA is a regional, non-government scientific organization founded in 1920. “Its objectives are to review and establish priorities of common scientific concerns in the Pacific Basin and to provide a multidisciplinary forum for discussion,” said Hawaii-based L. U. Eldridge, PSA executive secretary. “We also want to strengthen the bonds among Pacific peoples by promoting cooperation among the scientists of all Pacific countries.”
The theme of this year’s Inter-Congress is the integration of natural and social sciences in the new Pacific millennium, said coordinator Joyce Camacho, who doubles as the dean of UOG’s Graduate School and Research.
Five of the best minds in academia, including a Nobel Prize laureate, will serve up their ideas at the Inter-Congress: Ernest Sheridan Delfosse, national program leader for Weed Science at the U.S. Dept. of Agriculture; Mary Taylor Huber, senior scholar at The Carnegie Foundation for the Advancement of Teaching; Yuan Tseh Lee, president of Academia Sinica in Taiwan and a 1986 Nobel Prize recipient; Valerie J. Paul, professor of Marine Biology, University of Guam Marine Laboratory; and Robert A. Under-wood, Guam’s delegate to the U.S. Congress.
“Through an integration of the natural and social sciences, we hope to bridge the scientific communities to present a holistic understanding, and in the process, review Pacific and Asian concerns and priorities at a higher level,” said Camacho, who added that 275 scholars from throughout the world and about
200 Micronesia-based scholars are
to attend.
—Bruce L. Campbell
