Pacific Century Financial will combineBy Russ Lynch
the operations of its two subsidiaries,
Bankoh and First Federal Savings
Hawaii's biggest financial company said today it will combine its two largest subsidiaries, Bank of Hawaii and First Federal Savings, and cut about 550 jobs during the next two years.
Pacific Century Financial Corp. said First Federal's branches will become Bank of Hawaii branches. The parent company said that up to 25 branches, or about 25 percent of the combined total of 99 branches, will close.
The company did not say which branches will close. Bank of Hawaii has 65 stand-alone branches plus 13 in supermarkets. First Federal has 21 branches.
Linda Chinn, a spokeswoman for Pacific Century, today said she has no details yet as to how many of the 550 jobs will be lost by attrition, such as retirement, and how many by layoffs.
It will probably be a combination of both, she said. "Our attrition rate is such that we hope to absorb some of that." The cuts equal about 15 percent of Pacific Century's 3,600 employees.
The $15 billion company said the stagnant condition of Hawaii's economy and the economic turbulence in Asia have thwarted its efforts to improve profits.
"The competitive environment in financial services has dramatically intensified," Lawrence M. Johnson, chairman and chief executive officer, said in a statement issued early today.
Johnson said Pacific Century has to become more efficient and will cut annual expenses by about $25 million.
Subject to regulatory approvals, the First Federal merger into Bank of Hawaii will take place later this year and the First Federal name will disappear. First Federal customer accounts will become Bank of Hawaii accounts.
This morning's announcement apparently didn't impress investors. Pacific Century's stock traded in a narrow range today on the New York Stock Exchange. The stock was down 12-1/2 cents at $21.62-1/2 before the close, and volume was well below the six-month daily average, according to Bloomberg News.
David Winton, a banking analyst who follows the company for Keefe Bruyette & Woods Inc. in New York, said he was more concerned about what's happening in Hawaii's economy than about Pacific Century's exposure in Asia, which is small in relation to its earnings.
"I think what they're doing is tightening operations for what could be a difficult economic go of it in Hawaii," he said.
He noted that those being laid off will have a hard time finding work. "It's not like they can go across the street and get a job at the other bank, because they're not hiring either," Winton said.
Competitor First Hawaiian Inc. last year merged its savings and loan subsidiary, Pioneer Federal Savings, into First Hawaiian Bank, closing 14 Pioneer branches. It lost about 130 positions last year, mostly through attrition, and is cutting an additional 100 jobs this year, about half of which will be layoffs.
The failure of Hawaii's economy to recover after seven years of slump has played a big part in the moves and the leaders of both financial companies -- Pacific Century's Johnson and First Hawaiian Chairman Walter Dods -- had major roles in the governor's Economic Revitalization Task Force.
But Pacific Century said there is no immediate recovery in sight.
"We hope that the Hawaii and Asian economies will be reinvigorated very soon but we cannot rely on these markets to rebound in the near term," said Richard J. Dahl, Pacific Century president and chief operating officer.
He detailed the steps that will be taken:
A hiring freeze throughout Hawaii, effective immediately and staying in place through 1999.
The First Federal merger, leaving a combined total of 75 branches.
Operations on the mainland, where Pacific Century has been expanding, will be consolidated into one nationally chartered entity, Pacific Century Bank.
First Savings of Guam, a First Federal subsidiary, will be federally chartered and become a direct subsidiary of Pacific Century.
Bank of Hawaii has already announced that in April its Barbers Point branch will combine with the Ewa Beach branch, and that the Waialua branch will combine with the Haleiwa branch.
The store chain blamesBy Rick Daysog
a weak local economy and the
Asian economic crisis
Liberty House Stores is eliminating 500 jobs, or more than 10 percent of its work force, in the wake of the weak local economy and the growing Asian economic crisis.
The state's largest and oldest department store chain said yesterday that it is laying off 170 workers from its payroll of about 4,200 workers. The company also has eliminated 330 vacant positions during the past six months, according to John Monahan, Liberty House's president.
The downsizing is the worst in Liberty House's 149-year history.
The local retailer reportedly held talks last year with Cincinnati-based Federated Department Stores, which was interested in acquiring parts or all of Liberty House. But those talks broke down months ago, sources said.
"Now that we are facing another year of a difficult Hawaii economy, combined with problems in Asia, we have to take more aggressive steps to ensure the success of our business," Monahan said.
"While we hope for a swift rebound in the Asian markets, all our forecasting and analyses tell us that an economic recovery in our state is unlikely to happen anytime soon."
Monahan said he didn't expect further cutbacks.
Liberty House said it will refocus its merchandising strategy, putting a greater emphasis on local consumers.
The company said its tourism market, a major segment in Liberty House's overall business, has been hit hard by the Asian economic crisis.
While business from Japanese and other Asian customers has dropped steadily since 1995, sales from that sector declined sharply starting in November after the Asian currencies and the overseas stock markets came crashing down, Monahan said.
"When your currency is being devalued and you're concerned about your economy back home, your discretionary spending shrinks," he said.
Monahan also noted that the company's three Guam stores have been impacted by the downturn in Japanese visitors there, the Korean Airlines disaster and by damage caused by Typhoon Paka. He said the looming competition from mainland department store chains played no role in the cutbacks.
Neiman Marcus Group Inc. is opening a 160,000-square-foot department store in Ala Moana Center while Saks Fifth Avenue plans a 150,000-square-foot department store on land owned by Victoria Ward Ltd. in Kakaako.
Nordstrom Inc. also has announced plans for a 268,000-square-foot store at Ala Moana Center but the Seattle-based retailer recent pushed back the opening until the year 2000.
Founded in 1849, Liberty House, a unit of Illinois-based JMB Realty Corp., operates 11 department stores and 30 resort and specialty shops in Hawaii and Guam.
Its annual sales are in the $400 million range.
Liberty House noted that it has been reducing its staff for the past several years through attrition.
The company informed workers about the layoffs yesterday morning. Employees who received notices -- which include management as well as hourly workers -- will be offered severance pay and will be given the option to continue their health coverage.
Their last day of work will be Feb. 28.
"Like other local businesses that have faced these challenges successfully, Liberty House now is taking steps now to address the tough economy in which we operate," Monahan said.
"We are restructuring for the future," Monahan added.