Bankoh Bank of Hawaii parent Pacific Century Financial Corp., whose shares have surged 84.3 percent since Michael O'Neill took the helm just over a year ago, is about to end 2001 as one of the biggest turnaround stories among U.S. midcap banks.
turnaround
lauded
Lehman Brothers ranks the
bank 3rd in stock performanceBy Dave Segal
dsegal@starbulletin.com
The Honolulu-based bank, which announced a major restructuring plan April 23 to divest itself of noncore assets, placed near the top of the rankings for stock performance in the latest weekly performance report by global investment bank Lehman Brothers Inc.
Pacific Century ranked third among 57 banks in year-to-date stock performance with a gain of 41.1 percent and topped the list for best percentage gain above a 52-week low with an increase of 104.8 percent in the Nov. 23 report.
"I'm very proud of the way (the stock has) performed," O'Neill, the company's chairman and chief executive, said yesterday. "What we did is we told people what we were going to do and largely we've done it. That's always well received by Wall Street when management proves to have given them the right story."
Pacific Century, whose stock closed up 34 cents to $24.99 today and is up 41.3 percent for the year, has been busy meeting the company's reorganization objectives.
Just this year, Pacific Century has sold its interest in the Bank of Tonga and Pacific Commercial Bank of Samoa to Australia-based Westpac Banking Corp.; sold its Arizona branch franchise to Zions Bancorporation; sold its California branch franchise to U.S. Bancorp; signed a definitive agreement to sell Papua New Guinea, Vanuatu and Fiji operations to Australia-based ANZ and signed a definitive agreement to sell French Polynesia and New Caledonia operations to France-based Caisse Nationale des Caisses d'Epargne.
"In terms of divestitures, we are very close to having it all be done by the end of the year in terms of refocusing on our core markets and really getting the sales and marketing engine going," O'Neill said. "We've already done a very difficult, complicated part of this exercise and (President and Chief Operating Officer) Richard Dahl should get a lot of credit for that. We've done a really good job with the divestitures and now we have to gear up our services level here in our key markets. It's still a work in progress."
Pacific Century's stock, trading near a 10-year low of $11.25 on Oct. 27, 2000, began its surge when O'Neill was officially announced as the new leader following the market's close on Friday afternoon, Nov. 3. The stock closed that day at $13.56 and rose to $14.94 the following Monday on the first trading day under O'Neill.
"I'm pleased, gratified but not satisfied," O'Neill said about what has transpired since that time.
"Stock prices are really based on expectations and I'm not satisfied with doing it once," he said. "I want to be in the top quartile of our peer group every year and I want to double the value of this company every four years. We've set some high standards this year and want to demonstrate to people externally and internally that we can get those things done. I don't want it to be a flash in the pan."
Lehman Brothers analyst Brock Vandervliet, who has a "buy" rating on the stock, said he thinks Pacific Century ultimately could become a takeover candidate but doesn't foresee that happening anytime soon.
"I have not heard any speculation regarding that lately," Vandervliet said. "I think that they could be a takeover candidate at some point given their island franchise. It might make more sense for a larger organization to own the company. But in the near term, I think they're internally focused on executing on their restructuring and (a takeover) would be unlikely. It would be analogous to taking a pie out of the oven when it's half cooked. You've got to finish the restructuring, get the stock where it should more reasonably trade and then potentially evaluate your options."
O'Neill, who said there have been no discussions concerning a takeover, is hoping the bank can remain independent.
"I said the same thing repeatedly when our stock was at $11 last October and we were absolutely vulnerable (to a takeover)," O'Neill said. "Our stock today is (around) 25 and we're a lot less vulnerable. As long as we perform, our ability to maintain our independence is very high. But if we falter, we're no different than any other company that falters. The odds of being acquired increases. It all gets down to performance, management and execution. If we can do it well, and I think we can, this company has a very good chance of remaining independent."