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Outsider gives Shares of Pacific Century Financial Corp. climbed 10 percent today, the first trading since Friday's announcement that the parent of Bank of Hawaii has hired a new chairman and chief executive officer, Michael E. O'Neill.
new life to stock
of Bankoh parent
Analysts and investors
applaud the hiring of a new CEOBy Russ Lynch
Star-Bulletin
Pacific Century's stock, which rose as high as $15, closed up $1.38 at $14.94. Volume soared to just over 1 million shares, more than three times the six-month daily average of about 326,000.
Today's rise still has the stock well below its year-earlier level of more than $23, but analysts were generally positive about the company's outlook. The stock has recently traded at six-year lows.
The directors' decision to bring in outsider O'Neill for the top posts at both the parent and Bank of Hawaii "brings some strength to the management team," Robert Patten, an analyst with UBS Warburg in New York, said today. Warburg maintained its "hold" recommendation on the stock today and Patten said Pacific Century has some work to do yet to overcome the perception that its credit isn't as good as it could be.
"We think it's still going to have some cloud over it while it works through," Patten said. He said credit quality remains an issue for the bank and its earnings outlook remains cloudy as Pacific Century is under increased scrutiny by regulators.
But he rates the hiring of O'Neill, 54, a former vice chairman of Bank of America and more recently, chief executive of British-based banking giant Barclay's PLC, as a good move.
"While it isn't a surprise that they went to the outside (for a new CEO), this signals that Mike O'Neill has other qualities outside management that they might want to bring in, such as credit," Patten said.
Another firm with positive things to say about O'Neill was First Security Van Kasper in San Francisco. Van Kasper analyst Eric E. Rothmann also had nice things to say about Lawrence M. Johnson, 60, who retired Friday after being chairman since August 1994. The firm maintained its buy rating on the stock today.
Johnson did a good job at Pacific Century and made positive changes, and it was the stagnant Hawaii economy of the 1990s that held the bank down more than anything else, Rothmann said.
"Overall, the stock has not performed as well as it should have," he said, given its "underlying fundamental uniqueness," the fact that it was moving ahead with changes and that it trades for less than its book value. Rothmann described O'Neill as a great choice. "He has international exposure and national exposure. He has reworked franchises and he has sold franchises. This is a very positive move," Rothmann said.
Another analyst firm, Morgan Stanley Dean Witter in New York, raised its BOH rating today to "market outperform" from "neutral" but declined immediate comment.
On Friday, O'Neill told Honolulu reporters he believes he can improve Pacific Century's credit quality in a relatively short time and he is committed to buying $10 million worth of its stock personally on the open market over the next couple of months.
The company declined to say what it is paying O'Neill, saying his contract terms will come out in a proxy statement in a few months.
Pacific Century also announced Friday that Richard J. Dahl, who joined Bank of Hawaii in 1981, is staying on as president and chief operating officer of both the bank and the parent Pacific Century. Dahl had been considered a possible successor to Johnson.