FULL STORY »

Bankoh going international -- Hawaii style

Six years ago, Bank of Hawaii began reining in its unprofitable international operations to improve overall performance and refocus on Hawaii.

Now, the state's second-oldest bank is once again looking at boosting its international exposure by opening an international branch in Waikiki during the fourth quarter.

But Al Landon, chairman and chief executive of Bank of Hawaii, said the opening of the International Banking Center doesn't represent a return to the days when the bank had locations in Tokyo, Hong Kong, Singapore, Taiwan, Seoul and Manila, to name a few.

"We never left international banking; we left international locations," Landon said. "This is a chance for us to participate in the improvement in Waikiki and bring focus to our international business."

Landon said the bank's international operations in Hawaii have long been among Bankoh's most profitable businesses and it only made sense to capitalize on it. The bank's current international operations on Oahu are spread throughout several branches, but the opening of the international branch will consolidate everything under one roof.

As part of its consolidation and renewed emphasis on international banking, Bank of Hawaii recently hired former American Savings Bank consultant Betty Brow, who has more than 20 years of international experience in Asia at Bankers Trust, Chemical Bank and International Bank of Asia.

"It's just logical we should try to expand international banking where we can," Landon said. "Now we have a leader, and it seems like the right time to us. You look at the number of international investors in Waikiki, and every statistic tells you it's an international marketplace. We think there is an opportunity to improve our profitability and our service to our customers by enhancing our focus there."

The bank's overall deposits from international customers total "several hundred million" dollars, said Peter Ho, vice chairman and chief banking officer for Bank of Hawaii.

Bankoh's international center -- its 84th branch -- will be at 2155 Kalakaua Ave. in a 4,600-square-foot, third-floor space of the Kalakaua Business Center, which previously was called the ANA Building and, before that, the Mitsukoshi Building. The site, at the corner of Kalakaua and Beach Walk, is in a prime location that presently houses the Wyland Gallery and Planet Hollywood.

The building will be renamed the Bank of Hawaii Waikiki Center in the fourth quarter.

Under one of Bank of Hawaii's two long-term leases with the Shidler Group, the bank also will relocate its Waikiki branch on the corner of Kalakaua and Royal Hawaiian into the 8,000-square-foot spot occupied by Wyland. The lease at the existing Bankoh location expires at the end of 2008; Landon said he expects that branch will move into the Wyland site during the middle of next year. A small satellite Bankoh branch at Kalakaua and Kaiulani will remain in its location, Landon said.

"We will double our floor space in Waikiki with this move," Landon said.

Landon calls the bank's previous ill-fated international expansion outside Hawaii, executed by former CEO Larry Johnson, a case of bad timing. Those branches were either closed or sold under Landon's predecessor, Mike O'Neill, beginning in 2001.

"Basically, the bank was trying to make some overseas investments to maximize its profits," Landon said. "The strategy was great; the timing wasn't exactly the best. So we cut back on that when we realized we weren't making much money there. But our core business here in Honolulu has always been a great international business, and now it's just a time for us with a business plan focused on Hawaii to say, 'Let's maximize the potential of that business,' which is why Betty is joining us and we're putting the emphasis on the new branch."

The international branch, whose building permit was filed Friday, will be geared toward visitors and part-time residents who have connections with the United States and another country, Landon said. The branch will offer deposit services, investment services, payment or remittance services that include foreign currency, and lending services.

"Deposit services are international businesses and individuals who have connections in Hawaii and need U.S.-based deposits," Landon said. "Investments are basically the same group of customers but need investment services that may be tax-oriented or return-oriented. Then, there's the whole exchange and payments business, basically where they have yen or other non-U.S. currencies and convert back and forth. And then, occasionally, we'll find opportunities for loan services."

Languages that will be spoken at the international branch will be Japanese, Korean, Chinese (both Cantonese and Mandarin), Vietnamese and French.

Brow said her international banking experience gave her exposure to all of the Asian countries whether it was private banking, investment services or commercial.

"It did give me quite a deep background on the understanding of the culture, the language and the people in those regions," she said. "Our focus is Hawaii and Hawaii is really the link between Asia and the mainland U.S. for many people. So it's a good crossroad and I hope I can bring some of my knowledge and background to Bank of Hawaii."

Ho said opening an international branch in Waikiki represents an opportunity to elevate the bank's international business in Hawaii to the next level.

"We've been in the international business for a little over three decades now, beginning with the Japanese buildup in the '70s, mostly commercial, and then into the individual high net-worth side," Ho said. "That's a business we've had for a good amount of time and it's always been a profitable steady business for us.

"What happened is as we pulled back from the South Pacific and parts of the West Pacific and Asia, our international business is now pretty much confined to the Hawaii marketplace.

"I think what we see is an opportunity not only to build on the traditional business base we have in the Japanese national market, but we're also seeing a good amount of Korean business flowing into the marketplace and, aspirationally, everyone's talking about China and how do you get a piece of that, and what's the impact of China going to be on our island state?"

Brow, who will oversee the international branch as the senior vice president and manager of international client banking, said the bank's international efficiencies will improve with everything under one roof.

"The reason we have them all under one roof, or at least the major ones under one roof, is so we can have synergies across the various businesses, whether it's Korea or China or Japan," Brow said.

She said that besides being in a position to capitalize on China business as it flows into Japan, there are opportunities from other countries as well.

"There was a large number of Chinese families who have migrated from China to various Southeast Asian countries, and the net worth from these overseas Chinese families is tremendous," Brow said.

"So people who are from Indonesia, Thailand and Vietnam are, to a certain extent, connected to China. Therefore, when you see the flow of business between Hawaii and China, you have to count the other countries in (that group) as well."

Ho said Bankoh will be the first local bank with a branch dedicated to serving international clientele.

"The idea is to get everyone into a single space and service our clients better and make a statement that this is the type of business we're serious about," Ho said. "We're willing to make a physical investment and a people investment to grow."