CEOs hope for quick rebound
When last weeks hijackings grounded all U.S. flights, Hawaiis banks had to be creative.
Trucks, the next best form of transportation used by mainland banks to move bags of checks from branches to processing sites, were not going to help in the island state.
So the Hawaii Bankers Association chartered a boat. Two boats, actually.
With the trade group coordinating the effort, BancWest Corp.s First Hawaiian Bank and Pacific Century Financials Bank of Hawaii joined with community banks like Central Pacific Bank and Hawaii National Bank to send boats on the 10- to 13-hour trips between Honolulu and cities on the other islands.
When air travel resumed and the nuts and bolts of banking returned to near its routine, regional bankers in Hawaii and elsewhere in the United States began considering the disasters more far-reaching repercussions. Economists said they expect direct effects on some western states, particularly Hawaii, from a decline in air travel and its anticipated effect on tourism.
There will be a short-term hit in all the markets were in, said Walter A. Dods Jr., chairman and chief executive of BancWest, parent of Honolulu-based First Hawaiian and San Francisco-based Bank of the West.
But flipping through charts showing how the local economy reacted after other dire events the Gulf War, Pearl Harbor, the 1970s oil shock Mr. Dods said in his Honolulu office Tuesday afternoon that he is optimistic about a rebound. Hawaii has been through this before, he said. Historically, we have come back from these events.
Blocks away at Bank of Hawaii, a subsidiary of Pacific Century Financial Co., chief executive and chairman Michael E. ONeill offered similar hopes of a quick rebound.
He agreed that there is a high risk of recession, particularly in industries on the sharp end of this, obviously the airlines and hotels.
The issue is how long this lasts, he said, pointing out that after the Gulf War the states economy rebounded fairly quickly. He said he expects the impact of the terror attacks to show up on businesses within 90 days.
For banks in the state, a recession throughout most of the last decade depressed earnings. At Bank of Hawaii, the weak economy prompted an expansion into higher-yielding products such as syndicated loans, which produced high loan losses when the national economy soured.
Other bankers in the West are also eyeing the impact of last weeks attacks on local economies.
Keitaro Matsuda, senior vice president in economic research at UnionBanCal Corp., said that tourism though not a big part of Californias total economy is significant in areas such as Los Angeles and San Francisco.
For many people outside of the country, the U.S. categorically has become an unsafe place to visit, he said. As long as that perception lingers, that will hurt tourism.
At UnionBanCal, which is 64%-owned by Japans Bank of Tokyo-Mitsubishi, Mr. Matsuda said he is often asked to make presentations to visiting groups of Japanese business people. But since last weeks disaster, several groups have canceled scheduled meetings, and he said he has heard that many Japanese businesses have suspended travel to the United States out of fear of terrorism.
Travel and tourism make up 5.8% of Californias $1.3 trillion economy, according to research by the California Travel and Tourism Commission and the California Division of Tourism. About 25% of visits to the United States from abroad are to the state.
Still, regional bank executives said, customer confidence is their biggest concern.
The nature of this kind of problem is that the objective of terrorists is probably to cripple peoples psyches, said Harris H. Simmons, president and chief executive of Salt Lake City-based Zions Bancorp, which owns a network of affiliated banks in California, Colorado, and Arizona. The company is now looking at portions of its commercial loan portfolio more carefully.
But at the end of the day, a lot rests on the willingness of consumers to spend, and that triggers business investment, Mr. Simmons said.
Im fairly optimistic people will bounce back, he said.