BOH chief sees bright side


POSTED: Saturday, April 10, 2010

Al Landon would be the first to say he's no economist. It was the first thing he said yesterday at a luncheon attended by Leeward business leaders.

But as chairman and chief executive officer of Bank of Hawaii, Landon presented a sweeping view of Hawaii's economy when the recession peaked in 2008, and expressed cautious optimism about the future, as have many local economists.

“;The new normal is what people will talk about,”; Landon said in his remarks to members of the West Oahu Economic Development Association at the JW Marriott Ihilani Resort and Spa at Ko Olina. “;It's gonna be a lot like the old normal, except we're going to see a lot more government help in the process.”;

Bank of Hawaii required no government assistance, unlike mainland financial institutions. Forbes magazine recently rated it as the top-performing bank in the United States, with $12.2 billion in assets, up from $10 billion in 2008.

“;Thank goodness,”; that the federal government stepped in to bail out many of America's trouble financial institutions, Landon said.

“;The idea that the financial system in America could have collapsed is not at all a (product of) imagination,”; Landon said. “;Not everything was done perfectly, but some things were done in the face of a paralyzing situation that have made it all better for us.”;

Landon said Hawaii weathered the recession better than most other states. He attributed part of Hawaii's strength to the tourism industry, which is sometimes cited as a vulnerability by economists because of its reliance on foreign markets.

“;What we do is sell sunshine and smiles at a very attractive price,”; Landon said. “;The ability to bring other people's money to Hawaii has given us a great advantage. Keeping it here in Hawaii, that's a great challenge.”;

He said the state must be diligent in finding alternative sources of energy. Crude oil is selling at about $85 a barrel, an 18-month high.

“;About every dollar that we acquire from visitors, it's sent out to purchase oil to keep our energy levels high,”; Landon said. “;(Alternative energy) will help us in the long term.”;

Landon said Bank of Hawaii saw a large increase in deposits during the recession the past two years. Borrowing, on the other hand, was sharply reduced, and Landon attributed the bank's stability to lower lending.

“;We've seen the excesses go out of our consumption patterns here,”; he said.

Leeward development remains a bright spot for Honolulu. Landon cited development projects such as the University of Hawaii-West Oahu campus and future rail transit work as good indicators for growth.

“;(West Oahu) is probably the most encouraging part of the state,”; he said. “;We've got a growing community and not many parts of the state can say that.”;

Landon said businesses must have a good understanding of what works and doesn't work in Hawaii's economy, and to rein in expectations for growth, even when the economic recovery gathers steam.

“;It isn't realistic to do business expecting a 12 percent annual growth rate,”; he said. “;Tough thing to do sometimes when there's an exciting 'go-go' economy.”;

Forbes has quoted Landon as saying, “;Boring is good”; when it came to management. The bank's distinction as a top-performing bank came from conservative management.

“;We'll start to see business payrolls start to feed the consumption cycles a little bit, and deposits may go down,”; Landon said. “;I say let's try to keep the balance. The more resources we can keep in Hawaii, the better we're going to be able to support our local economy.”;