Asian banks & thrifts: L.A. is worth a thousand ventures.

Asian banks & thrifts: L.A. is worth a thousand ventures By Kathy M. Kristof

Richard J. Authur had to chase away the evil spirits before he opened Eastern Savings Bank in Alhambra. For Arthur, who manages an Asian-owned savings and loan catering to a largely Chinese clientele, that meant arranging fireworks, lion dancers and city approvals, an unusual effort for a financial executive.

Two years later, there are no evil spirits in the thrift or on its balance sheet. Eastern Savings Bank is among a small but growing number of highly successful Asian-owned financial institutions that have sprung up here to serve the burgeoning populations of Chinese, Korean, Filipino, Thai and Japanese immigrants.

"All you have to do is drive down the street to see how much the Asian population has grown," says Salvatore Serrantino, president of California Research Corp., Santa Monica. "If there isn't an Asian in the car in front of you, beside you or behind you, you're not in L.A.""

Indeed, California's Asian population rocketed nearly 40 percent in a five-year period ending in 1985, according to the U.S. Census Bureau. That makes Asians the fastest-growing ethnic segment here. Hispanics ranked second with a 21 percent growth rate, while the white population rose by only 3 percent.

And like the population, Asian financial institutions are growing in number, size and importance.

Of course, Japanese banks are by no means new to L.A. They have been major players on the local financial scene since Mitsui Bank Ltd., Tokyo, bought Manufacturers Bank in 1981. (Other Japanese banks bought sooner, but smaller.) Now Chinese and Korean institutions also are coming on strong.

Three of the 10 largest banks in Los Angeles are subsidiaries of Japanese institutions, and five of the top 25 are currently Asian-owned. The local savings and loan community hosts four Asian thrifts with more than $100 million in assets.

Asian banks differ from American banks in a variety of ways, but they also differ from one another depending on the ethnic groups they serve. Japanese banks, for example, cater not only to Asian customers, but to Americans as well. In many ways, however, they resemble traditional U.S. institutions.

Mitsui Manufacturers, for example, did not change its middle-market business focus after its acquisition by Mitsui, and Asians do not make up a significant portion of the bank's customer base. Mitsubishi and Tokai also contend their emphasis is not centered in the Far East.

"We are very much a domestic bank," says Ryan Lidschin, a Mitsubishi spokesman. "We see ourselves as a California bank that is coincidentally owned by a foreign bank. The only connection (between Mitsubishi here and its $200 billion (assets) parent in Tokyo) is if a Japanese company does business with Mitsubishi in Japan, there is a possibility that we will get their domestic business too."

On the other hand, many local Chinese and Korean banks and thrifts note that between 90 percent and 95 percent of their customers are Asian.

Ironically, many of the institutions with the strongest ethnic focus are actually owned locally by Asian immigrants, while the Japanese banks that cater to Americans are typically wholly owned subsidiaries of huge international banks.

Meanwhile, cultural differences between Asians and Americans are often well-noted in financial statements, particularly with Chinese institutions. Chinese tradition demands that loans be paid in full on Chinese New Year. Arthur says. He's been able to convince his customers that the tradition doesn't apply to real estate mortgages, but he still has clients paying off car loans with suitcases full of cash at that time of year, he says.

"I think they get the money out of Hong Kong," Arthur notes. "Until last year that was the only place that had no currency restrictions, but last month Taiwan lifted restrictions so you can take $5 million out at a time."

Such tradition can be appealing to bankers, because it boosts financial results at some Chinese thrifts to astounding heights. The average return on assets for California thrifts with assets between $100 million and $250 million in 0.87 percent; the average return on equity is 16.63 percent. Four of Los Angeles' five biggest Asian thrifts exceed those ratios by wide margins (See chart, page 23). The one that didn't exceed the averages has been hampered by rapid expansion, notes Betty Chu, chairman and chief executive of Trust Savings Bank, Monterey Park.

Japanese banks also often exceed average returns on assets and equity, but their margins are not as wide as those of Chinese and Korean institutions. Their loan loss ratios are often higher, too. Danny Y. Lau, senior vice president of finance for Standard Savings Bank -- the most profitable thrift in the group -- explains the phenomenon matter-of-factly: "Probably they have more loans for American people," he says.

So what are the biggest Asian players here and what do they stand for? The following is a directory of L.A.'s five largest Asian banks and the five largest thrifts.

The Banks:

Mitsui Manufacturers Bank, located in downtown Los angeles, is a wholly owned subsidiary of Mitsui Bank Ltd. of Tokyo. Less than a year ago, Yutaro Hayashi was named the top local officer, replacing Leonard Weil, who had been Manufacturers Bank's president since its inception. The $1.8 billion (assets) bank continues to focus on middle-market businesses and local professionals, a company spokesman says.

"The basic premise hasn't changed. We now simply have the ability to go after larger loans."

Mitsubishi Bank of California is "very much a domestic bank," says vice president Rian Lidschin, who laughs about being characterized as a Japanese firm where employees work long hours. (Most Mitsubishi employees walk out the door at 5 p.m., he says.)

"Japanese tend to like to do business with Mitsubishi because of language and a few customs," he notes. But the bank also has an active small business lending program and more than a handful of Occidental clients. Employees speak English and, sometimes, Japanese.

Yutaka Hasegawa is president of the $1.4 billion (assets) institution, which is owned by Mitsubishi Ltd., Tokyo. It is the seventh-largest bank in L.A., closely following number six, Mitsui Manufacturers.

Tokai Bank of California was purchased by Tokai Bank Ltd. of Nygoya, Japan, in 1982. The bank's president is currently Atsuo Hasegawa, who replaced Kaneo Takeda earlier this year when Takeda was transferred to a Tokai bank in New York. With $953 million in assets, Tokai, located on Sixth Street in the heart of L.A.'s financial district, ranks at L.A.'s 10th-largest bank, and it takes a broad approach, according to a company official. "We are doing business with many customers. We have commercial loans, real estate loans, dealer financing -- the only thing is now we have a Japanese chief executive officer."

Cathay Bank is the largest Asian institution that is domestically owned. About 20 percent of the bank's shareholders are Chinese, and the bank caters mostly to Chinese customers. "We have an open door for all, but our business offices are primarily in Chinese communities, so many of our customers are Chinese," says Miranda So, assistant to the bank's president Dunson Cheng. Cathay's headquarters is in Chinatown on North Broadway. It is L.A.'s 17th-largest bank, with nearly $400 million in assets.

California Korea Bank receptionists often answer the phone in their native tongue, which indicates the bank's focus on Korean expatriates who live, work and open businesses in the Mid-Wilshire district Los Angeles. The bank's president is Sung M. Hong, and its major shareholders are local Korean businessmen.

The Thirfts:

East-West Federal Savings Bank is currently the largest Chinese-owned thrift in Los Angeles, but it won't be for long. The highly profitable, $300 million (assets) firm recently agreed to be bought out by Talley Industries, a diversified manufacturer of high-tech products and clothing. Talley will pay 2.4 times East-West's book, an indication of the thrift's success, and it wants East-West's president Kellogg Chan to continue catering to its Chinese clientele.

Trust Savings Bank was started in 1981, when Betty Tom Chu decided that the local Chinese community needed a new institution with a woman at its helm. Chu, chairman and chief executive, calls her institution "multi-ethnic." But some accommodations are made for Trust's predominantly Asian clientele, Chu notes, "like putting a door in a particular place that's more good luck than bad luck." Employees speak English Mandarin, Cantonese and Spanish. Trust is the least profitable of the large Chinese thrifts here, but it is growing quickly by a acquiring offices, including a branch of Seapoint Savings in San Diego.

Standard Savings Bank is the most profitable of the local Chinese thrifts, boasting a remarkable 3.15 percent return on assets and a 38.77 percent return on equity, Serrantino says. (A 1 percent ROA is nothing to sneeze at, while ROE can fluctuate depending upon how much equity the thrift holds. The higher the equity ratio, the more difficult it is to earn a high return on equity. Standards is high on both.)

The $140 million (assets) thrift is owned by local Asians, and about 90 percent of its customers are Chinese, says Lau, John M. Lee is president and chief executive of Standard, which is headquartered in Chinatown with one branch office in Monterey Park.

First Public Savings Bank is another Chinatown thrift boasting assets in excess of $130 million. Although only blocks away from a larger direct competitor, Executive Vice President Peter K. Yue says the competition is not worrisome. "There are plenty of customers to go around."

Jack C. Lee is First Public's chairman and chief executive, while Robert Gee is president. The thrift is owned primarily by local Asians.

Eastern Savings Bank of Alhambra is operated by Richard J. Arthur, the only Occidental chief executive in the group. Chinese investors approached him more than five years ago, saying they needed an experienced manager for their soon-to-be-opening thrift. Arthur took the job. He says there are few similarities between running an American thrift and a Chinese one. His employees speak 18 different languages, but there are so many dialects in China that there are still a few customers who can't communicate except in writing. (China has only one written language.) In addition, he notes, Chinese generally do not have established credit histories, so loan underwriting standards must be altered to accommodate the customer base. And superstition is just one aspect of corporate life. But the Chinese are fine credit risks, Arthur says.

"I have only one loan that's more than 30 days delinquet, and that's because the owner filed for personal bankruptcy," he says. "I have to tell you, my federal examiners don't believe it."

PHOTO: Betty Tom Chu: Began Trust Savings Bank to serve local Chinese community

TABLE: L.A's five biggest Asian-owned banks(*)

  TABLE:                                        Return    Return    Equity
  TABLE:                           Assets         on        on     to assets
  TABLE: Bank/headquarters       (millions)     assets    equity      ratio

(*) As of year-end 1986

TABLE: L.A.'s five biggest Asian-owned S&Ls(*)

  TABLE:                                     Return      Return      Equity
  TABLE:                       Assets          on            on    to assets
  TABLE: Bank/headquarters    (millions)      assets       equity     ratio

(*) As of year-end 1986.