Bankoh to cut Bank of Hawaii Corp. said this morning that it will eliminate about 250 jobs, or 8.4 percent of its work force, during the next 15 months as it implements a new computer system.
250 workers
New computers and outsourcing
will save $17 million a yearBy Dave Segal
dsegal@starbulletin.com
In the last three years, the company already has eliminated 1,015 positions and divested noncore operations as part of a major restructuring,
Michael O'Neill, chairman, president and chief executive officer, said changes to the bank's key systems, as well as outsourcing its management to Milwaukee-based Metavante Corp., will reduce operating costs, enhance customer service and convenience, and save the bank $17 million annually.
"We were the only bank in Hawaii not outsourcing our systems, and that places us at a cost disadvantage," O'Neill said. "Given the restructuring of the last year, we have become a simpler company and we no longer need to manage a far-flung network. It simply made sense to simplify the system, as well as give the added benefit of improved customer service."
O'Neill said the reduction of roughly 250 of the bank's 2,983 positions will occur at various stages during the next five quarters while the system is being implemented and the bank will take mainframe system transition charges of approximately $35 million through the third quarter of 2003.
Bank of Hawaii spokesman Stafford Kiguchi said no one has been laid off yet, but employees involved in information technology have been aware of the pending system switch since February. In addition to the 250 jobs to be cut, the bank has about 100 vacant positions in other areas for which laid-off employees could apply.
"Our objective is to be a top-performing independent bank and I think what that translates to is strong performance," O'Neill said. "Given that we were at a cost disadvantage, I think we had no choice but to take this step."
The announcement of the new fully integrated computer system and pending layoffs was made with the release of the company's second-quarter earnings. Bank of Hawaii's profits in the period jumped 16 percent to $31 million, or 42 cents a share, from $26.7 million, or 32 cents a share. The company also said it was maintaining its quarterly dividend at 18 cents a share.
"We thought the quarter was very solid and exactly in line with our expectations and in line with what we told Wall Street," O'Neill said. "With our three-year plan, we are on track and making very solid progress."
Bank of Hawaii, whose earlier layoffs came under the tenure of former Chairman and CEO Lawrence Johnson as part of the "New Era Redesign," began shedding its nonstrategic operations when O'Neill took over in November 2000 for the retiring Johnson. The divestitures, which are now complete, included the West Coast; most of the South Pacific; and Asia, although the bank still maintains a representative office in Tokyo.
O'Neill, who inherited a deteriorating loan portfolio, said "our credit problems are pretty well behind us."
In fact, O'Neill said Hawaii's improving economy and recent trends in credit losses will result in the bank paring its allowance for loan losses. In the second quarter, its provision for loan and lease losses was $3.1 million, down 48.2 percent from $6.4 million a year ago and down and down 59.9 percent from $8.3 million in the previous quarter.
Due to the bank's divestitures, total assets, deposits and loans shrunk in the quarter. Assets were $9.8 billion, down 23 percent from $12.8 billion a year ago. Deposits were $6.5 billion, off 20.4 percent from $8.1 billion. Loans were $5.2 billion, down 29.2 percent from $7.4 billion.
Despite the lower asset level, O'Neill said the bank is making the same amount of money gauged by an increase in its return on assets.
"The return on assets in this quarter was 1.23 percent, up from .83 percent in the same period last year," O'Neill said. "So our objective of us becoming more profitable and using our capital more efficiently is paying off."