Taking Stock

State

The housing crisis has not hit Hawaii banks as hard as Mainland banks.

July was a tumultuous period for banks across the nation, with the fates of banking titans ending in “Mae” or “Mac” seemingly uncertain. Despite the shockwaves, Hawaii’s banks have fared better than their Mainland counterparts, says Frederick Cannon, an analyst at Keefe, Bruyette & Woods Inc.

He says the subtle expansion of tourism and military spending here since 2001 has made the economy more stable than on the Main-land, where weak housing and consumer retrenching cooled the economy. Still, he cautions unpredictability is the only certain thing today, although the hiccups in some Hawaii-based banks’ stocks aren’t indicative of the larger economy.  

In mid-July, Bank of Hawaii and Central Pacific Bank stocks both hit 52-week lows following concerns of Freddie Mac and Fannie Mae’s stability. BOH shares boomer-anged from $46.33 on July 8 to $39.34 on July 15 and back again in little over a week. CPB shares were nearly identical, bottoming at $7.41 on July 15, from $10.59 on July 8, and returning to $10.57 just two days later. Cannon says, “This volatility in the stocks is not an indication of the health of the banking system.”  

Overall, he says, Bank of Hawaii and First Hawaiian Bank have performed well, in part because they avoided involvement in Mainland operations. He says Central Pacific Bank’s current performance is related to its entanglement in the West Coast’s slumping housing market.

Predicting the current economy can be like grabbing smoke, but Cannon points out that watching oil prices can glean some information. He says, “As oil prices go up, financials tend to go down,” a relationship of which any Isle resident who has filled up on gas recently is acutely aware.

Cannon says the performance of banks will be determined by broader events, not short-term stock shock. “We’re feeling the economy slipping, but nobody yet knows how bad it’s going to be because we haven’t really entered a recession yet,” he says.
—Casey Chin

 

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