Sweet Deal: Ever the Straight Shooter, Walter Dods Talks about the Success of the Unusual Merger That Created BancWest Corp.; Working for the French; and Banks' Big Advantage

Maybe it's the Honolulu address--five time zones distant from the East Coast--but BancWest Corp., and its energetic CEO, Walter A. Dods, Jr., have a pretty low profile for being the 25th largest bank holding company in the U.S. The $36 billion-assets company operates in seven western states and is consistently profitable as well. Second quarter ROE was 10.71%, up from 10.41% the previous year. Earnings were $107.7 million, up 11.5%, and earnings per share were.... well, $107.7 million. BancWest Corp. has been wholly owned by BNP Paribas, the Paris-based financial services giant, for two years. That, perhaps, more than anything, explains the low profile. Dods and BancWest Corp. president Don J. McGrath don't do investor roadshows anymore. They just have to keep Paris happy, and so far they have. How they arrived at the current situation is more than a little unusual. Dods, who was ABA president in 1996, was CEO of First Hawaiian, Inc., and its main subsidiary, First Hawaiian Bank. Bank of the West, headquartered in San Francisco, Calif., was 100% owned by BNP Paribas--McGrath was CEO of the California bank'. In 1998, First Hawaiian and Bank of the West merged forming a new holding company, BancWest Corp., which was 45% owned by BNP Paribas. Headquarters for the new holding company was Honolulu, with Dods as CEO. McGrath, in California, was president. At the time, First Hawaiian had about $7 billion in assets while Bank of the West had about $5 billion. Most of the growth since then has come in the Bank of the West franchise on the mainland, with a big boost coining last year when it acquired $10.5 billion-assets United California Bank, Los Angeles. In December 2001, BNP made an offer for the remaining 55% of BancWest Corp., which was accepted. Dods spoke about this arrangement and responded to other questions in an interview in late September. ABABJ: You merged with Bank of the West in 1998, and that bank's management team is still in place. That seems unusual. Dods: A beautiful part of that merger, unlike most bank mergers where you have a massive amount of displacement, was that we were able to put the two companies together without any loss in management. So, one and one really equaled three instead of one and half. We also kept the management of the holding company very thin--myself as CEO and Don McGrath as president. So we didn't create any new jobs as a result of the merger nor did we have to cut any jobs with the exception of some in the technology area. First Hawaiian had just put in a new operations center in Honolulu, so we agreed to run the combined company from our technology platform. Another thing was unusual: Many companies try to cram cultures together after a merger--that's what people tell them to do. We thought long and hard about that and decided it wasn't the wisest thing to do. We've kept both cultures. First Hawaiian is unique in that it is a big fish in a small pond, with 41% market share. Bank of the West at the time was a smaller fish in a gigantic pond--California. In Hawaii, connections are extremely important, whereas in the California they may not necessarily be so. At the time the banks merged, First Hawaiian was the bigger institution, by 25%. Five years later, the Hawaiian bank is a little under $10 billion and Bank of the West is closing in on $30 billion. So their culture is now the dominant culture, although we keep our unique Hawaiian brand. The French Connection ABABJ: Can you talk more about the BNP Paribas arrangement after the two banks merged? Dods: We had a four-year stand-still agreement with them, which said, in effect, they could never buy more than 45%, unless they bought 100%. In this way there could be no creeping control that would [jeopardize] the other shareholders. After three years, things had gone very well and the chemistry on all sides was excellent. …

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