When asked to provide my perspective on the current state of the banking industry in Guam, I reached out to Mark Tokito from Bank of Hawaii, Kin Cook from Bank of Guam and Ed Untalan from First Hawaiian Bank for any input they would like to provide. Although we are highly competitive, we also work well together.
An example is we will regularly buy/sell loan participations from/to one another.
Another is during Covid 19, BankPacific needed to send cash to our office in Palau. As you might imagine it was quite an expensive endeavor. So did the Bank of Guam, so we did it together and shared the cost. And on those occasions when we hear legislation is being considered that could harm our industry, we will put our heads together to figure how to stop or amend it. Fortunately, the latter does not often occur.
And finally, another example is this article. Ed did more than just provide input, he provided 90% of the following, literally. (Thanks Ed. I owe you lunch.)
Your banks on Guam are in a robust state, characterized by financial health and a readiness to lend. We all have strong capital positions and liquidity. As the island navigates through economic fluctuations and anticipates future growth, we are all well-positioned to support both personal and business financial needs. And at last federal rate cuts are imminent which will help to enhance the lending outlook and spur economic activity.
Economic stability and future prospects
Guam’s banking sector is buoyed by positive economic indicators, most notably the ongoing military buildup and the recovery of the tourism industry, which albeit is slow, is coming. And the federal buildup is not limited to Guam but is occurring throughout our region which will benefit all Micronesian communities.
One item often overlooked however was pointed out by Kin Cook. It is the recently concluded renegotiations of the Compact of Free Association Agreements, which will bring billions of dollars to our region over the next 20 years. This will help to improve infrastructure, housing, health care, etc. throughout the Western Pacific which benefits all, including those of us who call Guam home.
These factors and others contribute to a stable economic forecast for the next decade.
Competitive banking landscape
Despite the presence of only four main commercial banks — BankPacific, Bank of Hawaii, Bank of Guam and First Hawaiian Bank — as stated above, the banking landscape on Guam is highly competitive. This competition is intensified by the presence of finance companies, fintech firms and credit unions. The latter, which by the way, do not pay income taxes. We do not know the answer as to why not either.
In addition to these four banks, First Commercial Bank operates on the island, catering primarily to Taiwanese customers. This foreign bank adds another layer of competition and diversity to the banking sector. A piece of trivia, First Commercial’s Guam office was its first branch outside of Taiwan. It opened in Guam in January 1977.
Individual bank profiles:
- BankPacific: Known for its customer-centric approach, BankPacific offers a comprehensive range of financial services, including personal and business banking, loans, and investment services. Its strong community focus and local expertise make it a preferred choice for many island residents and businesses.
- Bank of Hawaii: With a significant presence across the Pacific region, Bank of Hawaii combines local knowledge with extensive resources. The bank provides robust financial solutions, from consumer banking to wealth management and commercial services, catering to a broad spectrum of clients.
- Bank of Guam: As a locally owned institution, Bank of Guam has deep roots in the island community. It prides itself on personalized service and a commitment to fostering economic growth within the region. The bank has an extensive network and range of services.
- First Hawaiian Bank: Leveraging its extensive history and experience, First Hawaiian Bank offers a wide array of banking services. Its strong focus on customer service and innovative financial products helps it maintain a competitive edge.
- First Commercial Bank: This bank primarily serves the Taiwanese community on Guam, providing specialized services that cater to the needs of its niche market. Its presence adds to the financial diversity available on the island.
Anticipated federal rate cuts and lending opportunities
We all watch interest rates closely, daily. The first site I go to just about every morning is the Financial Times to see how Treasury rates moved during our nighttime.
The “almighty” fed funds rate is coming down soon, with a least one cut before year end. I personally do not expect rates to go to where they were 30 months ago. Those rates were historically low and were so because of the decade plus long efforts to recover from the financial crisis in the U.S. post 2008.
Lower rates translate to more attractive lending opportunities for both the banks and our customers. And not just for commercial purposes. It works the same for consumer and residential lending.
In conclusion, we hear from Ed Untalan, “The banking sector on Guam is in a strong position, characterized by financial health, competitive dynamics, and a readiness to lend. The anticipated economic stability from military investments and tourism recovery, coupled with potential federal rate cuts, presents a promising outlook for the island’s financial future. As banks continue to innovate and compete, consumers and businesses on Guam can expect a vibrant and supportive financial environment.”
That’s it. Thanks for getting this far. And as far as the competitive stuff, yes, please give me a call first.
Philip J. Flores is president and CEO of BankPacific, which celebrates 70 years of doing business this year. He can be reached at philipf@bankpacific.com.