HONOLULU Pacific Century Financial Corp. said it is seeking buyers for its nine Arizona branches, in a move observers say signals a rationalization of the banking companys sprawling network that should accelerate in 2001.
The parent of Bank of Hawaii, Hawaiis largest commercial bank, announced late Thursday that it has hired the investment bank Credit Suisse First Boston to advise it on the sale. The branches hold $410 million of deposits.
Though the branch sale has been in the works for about a year, the decision to pull the trigger came on the watch of Michael E. ONeill, who was appointed chief executive officer in November with a mandate to turn the troubled company around.
Pacific Century has had a rough year. In its second-quarter earnings report, the company disclosed greater-than-expected nonperforming assets in several areas of its portfolio. In the third quarter it was forced to sign a memorandum of understanding with its regulators on future capital decisions. Its share price has fallen by about one-third since June.
Richard Dahl, president of Pacific Century, said the company began to consider a sale of the Arizona branches in the first quarter.
We do well in the Arizona market, so this is really a matter of focusing on Southern California, he said in an interview from Fiji, one of the Pacific islands where the company has banking offices.
The $13.9 billion-asset company entered Arizona in 1987 when it bought five First National Bank of Arizona branches; it subsequently added four more branches in the state. The nine branches are part of a Southern California subsidiary, Pacific Century Bank NA.
Though potential buyers have known about the Arizona divestiture for the past few months, Mr. Dahl said he does not expect a sale before January.
Observers were generally cheered by the announcement. Indeed, many saw the move as an indicator of the direction in which Mr. ONeill plans to take the bank even though it appears he simply signed off on a decision that was brewing before his arrival.
Its positive news in that its a harbinger of further rationalization, said Brock Vandervliet, an analyst with Lehman Brothers.
Mr. ONeill is expected to announce results of his review of the companys growth prospects by April.
Among possible changes: accelerated reduction of the banks syndicated portfolio and further sales of noncore branches. There has been some speculation that Pacific Centurys investmentin Bank of Queensland, Australia, has been up for sale, said a second analyst.
My question is, Whats next? said Robert Patten, an analyst with UBS Warburg. Will they keep California? It really depends on how you allocate capital.