New CEO for Bank of Hawaii

January 01, 2001, 2:00 a.m. EST 3 Min Read

Title: Chairman and CEO, Pacific Century Financial Corp. and Bank of Hawaii, Honolulu
Successor: Tapped in early November to replace Lawrence M. Johnson, who announced in August that he would step down as soon as Pacific Century's board of directors found a successor, O'Neill takes over the $13.9 billion-asset bank at a critical juncture.The company, the holding company for Bank of Hawaii, returned just 8.85% on average equity in the first nine months of 2000, down from an already low 10.99% in the same period in 1999.
Challenges: O'Neill speaks frankly of the problems his new company faces. "ROE is low, caused primarily by credit problems. The bond rating is at the lowest investment grade. We're operating under a memorandum of understanding from the Federal Reserve--that was the shot across the bow," he says. Perhaps the hardest issue to resolve, he adds, is "whether this rather small institution is in a position to execute its chosen strategy. That is yet to be determined."
Confidence: Yet, investors seem confident that O'Neill is up to it. Since his appointment was announced Nov. 3, Pacific Century's stock has risen to more than $15 (its closing price on Dec. 14), an increase of more than 11%, compared with a 2% drop for the S&P Bank Index in the same period.
Background: The reason is 54-year-old O'Neill's reputation as a turnaround artist. He started his career some 28 years ago at Chicago's Continental Bank, "which had its problems, some much worse than ours," he says. "It was an extremely painful and valuable experience." The most important lesson that taught him: "Bad loans kill."
Globetrotter: He left the bank in 1984, and spent five years on his own as a London-based consultant to banks around the world. "I learned a lot about how to solve problems," he says.The experience also may help him contend with Pacific Century's operations in Asia and the Pacific islands. Despite political turmoil in Fiji, which contributed to the company's loan problems, its Pacific segment has been profitable. The same can't be said for the Asia business, primarily correspondent banking and trade finance, which lost $1.1 million in the first nine months of 2000.
Turnaround: O'Neill rejoined Continental in 1989 as head of M&A and eventually became chief financial officer, a position he held through its sale to BankAmerica. Subsequently, BofA was sold to NationsBank. By taking a hard look at each business line to determine which were earning above their cost of capital, and either remaking or getting out of those that weren't, O'Neill helped BofA boost return on equity to more than 18%, from 13.5% just four years earlier.
Disappointment: He left BofA in early 1999 to become CEO of Britain's Barclays PLC, but found himself unable to take that job due to arrhythmia that caused him to black out. At the time, doctors couldn't determine what caused the arrhythmia, but they eventually discovered that a virus was its source. Now he's fully recovered."What was obviously the high point of my career," he says, resulted in a huge disappointment. Of course, the weather is better in Honolulu. But he is more excited about the business challenges than the surf. "This is a fascinating situation," he says.
Strategy: Although O'Neill has given himself an April deadline to set and announce his strategy for Pacific Century, he's likely to follow a similar approach to the one he took at BofA. Indeed, on Nov. 30 the company announced it was looking for a buyer for its Arizona branch network, and a deal could well be announced by the time this magazine comes out.But for now, he's still studying Pacific Century's complex operations and hasn't charted his exact course. So he's wary of saying too much. "There's nothing like the facts to change your mind," he says.