Pacific Century Financial Corp., owner of Hawaii's largest bank, said Monday it will sell its California branches and most South Pacific and Asian holdings by the end of the year to focus on its businesses in Hawaii.
The Honolulu-based company, owner of Bank of Hawaii, said it plans to retain operations in Japan, American Samoa, Hawaii, the west Pacific and a support office in Arizona. The company operates banks in Asia, the South Pacific and the western U.S.
The move comes five months after the company hired Michael O'Neill, former Bank of America chief financial officer, to improve earnings. O'Neill said in an interview that the bank may sell its California and South Pacific businesses this quarter.
Shares of Pacific Century rose 94 cents to close at $22.10 on the New York Stock Exchange.
Joe Morford, analyst at Dain Rauscher Wessels, estimates Pacific Century's California business--branches under the name Pacific Century Bank--could fetch $175 million, based on other recent transactions in the state.
Though as many as 1,000 employees might be affected, the company anticipates many would keep their jobs under new owners. Pacific Century will focus on other retail and commercial banking and financial services and plans to seek approval next year to change its name to Bank of Hawaii Corp.
O'Neill said one of his first tasks was to improve credit quality. Pacific Century said first-quarter net income fell 15% to $33.7 million, or 42 cents a share, from $39.8 million, or 50 cents. In the quarter, O'Neill said, the company pared nonperforming assets--debt it had flagged as unlikely to be paid--by 35% to $119.5 million, largely by selling bad loans.
The company decided to exit certain markets because these businesses "have not and will not generate returns above our cost of capital and are not likely to," O'Neill said. "In California, we have less than 1% of a market that is dominated by large players."
He said several banks had already approached the firm about buying the California banking business before the announcement. Analysts speculated that the likely buyers would include Zions Bancorp, Honolulu-based BancWest Corp., Comerica Inc., U.S. Bancorp and Beverly Hills-based City National.
Pacific Century entered California in 1997, when it bought California United Bank, a subsidiary of CU Bancorp. It has 19 branches, most in Southern California, with $1.3 billion in deposits.