‘Boring’ has benefits,
Bankoh chief says
Bank of Hawaii Corp. went into expansion mode once before and paid the price.
Now, four years after former Chief Executive Mike O'Neill turned around the bank's fortunes, successor Allan Landon is in no hurry to repeat the mistakes.
Landon, who's been in charge for two and a half months, told the Hawaii Society of Corporate Planners yesterday that there's still plenty of things to do on the home front before the bank even begins to think about expanding again.
"The answer I always give is (expansion is) not in our plans," he said before a crowd of about 150 at the Hawaii Prince Hotel. "You learn not to say never, even in a short time as CEO. We're about building (shareholder) value, and if we can find a path that would be value enhancing by acquisitions, we would certainly consider it."
Landon said he just returned from a trip to New York to talk to analysts and investors, and the feeling he got was that Bank of Hawaii lacks the excitement of years past.
But that's a good thing.
"We have become a more boring company," Landon said. "(Analysts and investors) love the idea that we're a more stable and predictable organization that has a little bit lower risk profile."
Bank of Hawaii, which Landon referred to as "America's smallest international bank and least efficient bank" before O'Neill's arrival, has refocused itself on the Hawaii market. The bank is focusing on internal growth at the same time that two of its rivals are taking the acquisition route.
BancWest Corp., parent of First Hawaiian Bank, recently completed two mainland acquisitions that made it the seventh-largest bank holding company in the West. In September, Central Pacific Financial Corp. completed a one-and-a-half-year struggle to purchase City Bank parent CB Bancshares Inc.
"I spent a lot of years in professional service, and (had exposure to) around 150 banking mergers, and in that experience you see that less than half -- somewhere in the range of 25 percent -- accomplish their initial objective," Landon said. "So, puling off a business combination and expanding into a new territory is not an easy thing to do, and our company would think very hard about that."
Before O'Neill departed at the end of August, he divested branches in a large part of the South Pacific, Asia and the mainland, as well as cleaned up the loan portfolio. The bank's stock has rewarded investors by reaching an all-time high of about $50.
"It's about focus, it's about segmentation and understanding the risks," said Landon, who is also chairman and president of the bank.
The company also is using a new information services system that is saving the bank more than $17 million a year and increasing efficiency. Before completing a $35 million transition to the new system, Landon said the bank was "spending more on technology than banks three times our size."
"We had seven general ledger systems, nine operating platforms, and none of them spoke to each other," Landon said. "We were one of the very few banks that bank on both sides of the time zone, so we just built separate systems. It worked beautifully. These were elegant systems. We had great technology people all over the company, but at the end of the day, we simply couldn't afford it."
The new technology system also has helped Bank of Hawaii close its books 24 hours after the end of a quarter and avoid "just-in-time accounting," as Landon put it. That's when the bank would close its books between three and three-and-a-half weeks after the end of the quarter and just before the earnings were due to be released.
Landon said the bank's three-year strategy cycle includes plans for each of its 40 revenue segments and 25 support segments. Each of those segments, Landon said, needs to improve.
"We've still got a ways to go to become a more efficient organization, although we've come from America's least efficient to where we're just a little bit better from the norm for banks our size," he said.
