Bankoh parent
restructuring wins
approval by
Wall Street

Pacific Century shares buck a
down day for bank stocks and
jump 4% on heavy volume

Bankoh, Pac Century cuts hit at all levels

By Russ Lynch
Star-Bulletin

Wall Street today slowly warmed up to Pacific Century Financial Corp.'s restructuring announcement, sending shares of the Honolulu-based company up 4 percent.

"If you compare it with what other banks did today, it's actually acted very positive," said Erika Hill, an analyst with Pacific Crest Securities in Seattle. "Regional banks are down 4-to-5 percent," she said in the middle of the trading day.

Pacific Century, the parent of Bank of Hawaii, closed at $19.06, up 75 cents. The shares fell slightly early in the morning but closed at its high point for the day.

The Dow Jones industrial average, meanwhile, closed down 1.08 percent at 10,910.33, with many major bank shares lower on fears of higher interest rates. The BKX, a widely watched bank index, dropped 1.98 percent.

"The bank group is down," noted Joe Morford, an analyst with Dain Rauscher Wessels in San Francisco. "Clearly, (Pacific Century is) outperforming the group today."

After the stock market closed yesterday, Pacific Century announced that it was reorganizing the company and cutting 1,015 positions, including 266 layoffs.

There might have been more action in the stock if yesterday's announcement was a surprise, Morford said but it had been widely anticipated.

"The goals have not changed," said. What did happen yesterday was that Pacific Century finally provided details of how it plans to meet those goals, Morford said.

"It all comes down to execution. Investors want to see how these goals are achieved," he said. Morford said that if the company is successful in carrying out the changes it announced, earnings should increase and that should be good for the stock.

New York analyst David H. Winton of Keefe Bruyette & Woods, noted that the volume of trading in BOH was higher than usual, at 419,100 shares today, more than double the daily average of 160,954 for the previous 52 weeks.

"The announcement itself is not a surprise," he said, noting that the way the bank is handling its problems is "within expectations."

Like the other analysts, Winton noted that although Pacific Century's stock didn't move much in price, it did outperform banks in general. "It is a bad day for banks," he said.

Honolulu analyst Randy Havre, of Honolulu Venture Capital, said today's stock market reaction was "not too bad."

Pacific Century's intentions had been understood earlier. "It was pretty much priced into the stock already," Havre said. He, too, noted than bank stocks in general were down today.

A number of analysts participated in a conference call with Pacific Century executives that began two hours before the market closed. Later, Pacific Crest's Hill said the talk probably boosted analysts' already-positive reaction.

"Management seems to be really convinced that this is going to be a good plan and they seem to be really committed to making this work," she said.

Hill said analysts participating in the conference call were told about an employee incentive program and she also found that positive.

Joan Bennet, a spokeswoman for the bank, said Richard Dahl, Pacific Century president and chief operating officer, told analysts the plan will link compensation to performance.

Bank of Hawaii had incentive programs in the past, but the new one, which is specific to goals detailed in the bank's "New Era" program, is broader in scope than anything previous, Bennet said.

In another action aimed at improving the stock's value for investors, Pacific Century's board of directors yesterday authorized repurchasing up to 300,000 shares of the company's common stock each quarter, starting in the fourth quarter of this year. The company has a little more than 80 million shares outstanding. Pacific Century stock, traded on the New York Stock Exchange, hit a 52-week high of $24.94 in January and a 52-week low of $15.50 in October.