Herb Boydstun runs Hibernia Bank, whose 38% share of the market makes it the largest financial institution in the city of New Orleans. Not only is his landmark downtown New Orleans headquarters shuttered, but 60 of his 321 bank branches are still closed, and 21 appear to have been significantly damaged.
Plus, 3,000, or nearly half, of his 6,200 full-time employees are now refugees from their homes. Operations once centered in downtown New Orleans are now scattered through four locations in Louisiana and Texas. His executive team is camped out in blocks of hotel rooms in Baton Rouge, and one manager is even staying with Boydstun at a home he has in town. It's unlikely, he says, that they'll be back in New Orleans before November.
While Boydstun, 58, juggled branch reopenings, the search for employees, and the challenge of relocating Hibernia's operating systems in the aftermath of Hurricane Katrina, he was also completing negotiations on a deal to sell the entire corporation to credit-card giant Capital One Financial (COF ). The deal, initially slated to close Sept. 1, was repriced on Sept. 7, for $5 billion -- $350 million less than previously expected, to compensate for the damage from the storm and the uncertainty surrounding its New Orleans business.
And Hibernia will take a financial hit beyond that. It has already announced that for those affected by the hurricane it will defer payments on all customer loans and lines of credit, and on small-business loans under $1 million until January, 2006. The bank will also allow customers to stop paying their mortgage for three months and repay that money over 18 months. In the long term, analysts expect Hibernia will benefit from the demand for loans that will come from rebuilding the city.
On Sept. 7, BusinessWeek Senior Writer Nanette Byrnes caught up with Boydstun. Speaking by phone from the bank's Baton Rouge offices, the CEO talked about closing the Capital One deal and how the bank will move forward from here. Edited excerpts from the conversation follow:
Update us on where the bank is operating today.
The main parishes impacted are Orleans, Jefferson, and St. Tammany. Orleans is where the city is, the central business district, the French Quarter, the west bank of the Mississippi River. You have some with still a lot of water in them. They're predicting it may take a month to six weeks to two months to get into the city. In the city, it wouldn't help us to have a branch open right now.
Some branches, we're just waiting for the electricity to come back on; some offices will open in Jefferson and in St. Tammany; some may be already. We're very, very focused on getting those offices open. You do a third of your business in Texas, and many of your markets in Louisiana are open. How is business there?
I'm happy to report all of our systems are up and running, and we're able to completely serve all of our customers. We ran all of our operations out of the city, and we had to move them out of the city a couple of days after the storm. We had a couple days where we had some operating problems.
It's difficult when you run a business that's so technology-dependent. But we got that fixed, and now all our systems are up and running -- bill pay, online banking, ATMs. Outside of the affected areas, it's business as usual. But busier.
Everyone is very, very busy. A million people left that area. I went down to our lobby this morning. We would normally have maybe 10 people in that branch -- we probably had 120 customers in there. There are a lot of people anxious to do business. They have lots of questions.
How do you rebuild from here?
Our top priority is our customers and keeping everything we do focused on our customers, whether that's cashing FEMA checks, helping them have ready access to money, or buying a new car because their car was flooded in the hurricane. We need to keep our eye on serving the customer.
These customers have lots on their minds right now. We want to make the customer feel so comfortable and so at ease. We have to make sure all our facilities are up and running, all the systems are up. We want to make sure we're doing a great job of communicating, to get in touch with all our employees and all our customers.
How are you doing that?
[We're going that] in almost every way we can -- television, newspaper, word of mouth, on our Web site. You try to use everything that's available to you.
Have you located all of your people?
We had about 3,000 people in the affected areas, where the storm had its greatest impact. People really scattered in very many different directions. We're still trying to reach them. We've reached over 2,000 of the 3,000.
The first few days, there was almost no way to communicate -- cell phones didn't work, and everyone was trying to use them. As each days passes, you're able to get more and more people.
Of the 3,000 that were displaced, I would guess we have about 1,200 back at work. They want to get back to work so they can help other people. In the lobby here in Baton Rouge, I was surprised the other day: I walked in and saw a security guard from our main office in New Orleans back at work here. He had tried to weather the storm, he climbed out of his window as his house was flooding, and he lost his wallet and everything in his pocket. How is your main office?
Our headquarters building is fine. It was built in 1921, it's on the historic register, and believe it or not, there was only one window blown out. We did get some water in the building a little, in the first floor and basement.
But we really are staying out of the city as best we can. We want to get in enough to survey our offices, but that's it. In the midst of all this, you were also doing due diligence about the sale to Capital One, which the price its paying. Why is that still a good deal for you?
The deal is extremely important to us. The integration, we had to lay it aside for a few days, but you work through those things by working very hard -- much longer hours, being reasonable, and wanting to get things done. Board meetings were done in a telephonic fashion.
I have directors scattered in all parts of the Southeast -- Florida, Georgia, Texas. But even trying to get all your directors together, lawyers, investment bankers on the phone, it never took us longer than five or six minutes. And we did that three, maybe four times over the last week.
Going forward, having a national brand becomes very, very important. Cap One has very high brand identity. Cap One has more customers in Louisiana than we do, and we have the biggest bank share. There's a lot of things we can do together from a service and products standpoint.
Edited by Rod Kurtz