Asian banks prosper amid industrywide trauma: lenders concentrate on serving their own communities.

Asian banks prosper amid industrywide trauma

As many area thrifts and commercial banks continue to face financial woes, Asian-American institutions are performing exceptionally well by lending primarily to individuals and smaller businesses in their ethnic communities.

"Immigrants who are starting new businesses are good risks," said Charles C. Kim, president of Koreatown-based California Center Bank. "They are good risks that do not default. They have a total commitment to making the business successful because it is a life and death struggle for them."

And Kim added that because of the bank's connections in the community, "we know who the crooks are."

Kim explained that the bank typically makes several profitable loans on the same businesses in the community as immigrant trade up for bigger and better businesses and sell theirs to even newer immigrants. California Center Bank, like many of Asian-American banks, avoids making risky commercial real estate loans that have hurt many Los Angeles banks' viability.

Barry Rubens, chief executive officer of Santa Monica-based California Research Corp., noted that a survey of the area's Asian banks showed they were strong performers.

"After surveying the earnings for the first six months of 1990 for 15 Los Angeles basin banks, I have found that the performance for 13 of these banks was absolutely spectacular and far exceeded the overall bank median performance on return of assets and return on equity," said Rubens. "They have identified a profitable marketing niche and are serving these needs. Their numbers are better than the biggest state banks."

As a group, Asian-American institutions have fared well by every measure of profitability. For example, return on assets at Cathay Bank, General Bank, Far East National Bank, Hanmi Bank of Koreatown and California Center Bank ranged from 1.49 percent to 2.17 percent, far higher than the overall 1 percent median for all California banks, according to California Research Corp.'s surveys.

Two Asian-American banks surveyed by Rubens - Grand National Bank of Santa Ana and Wilshire Center Bank of Los Angeles - are performing well below the state median at a loss.

In return on equity, the 13 best performing Asian-American banks far exceeded the California bank median of 13 percent with returns in the 17 percent to 30.5 percent for Far East National Bank.

Four Asian-American S&L's, East West Federal Bank, Standard Savings Bank, First Public Savings Bank and Trust Savings Bank also far exceeded the California median on return on assets and return on equity, according to the survey.

Rubens said these banks are performing well because they control their costs for money and do not have to offer high interest rates to attract depositors.

These banks and S&Ls, however, should not be confused with Asian-based institutions such as Mitsubishi Bank. Besides being headquartered in Los Angeles County, banks such as Cathay and Far East were founded and managed by U.S. citizens. In most cases, they primarily serve U.S.-based businesses and U.S. citizens.

These banks and S&Ls have experienced major growth in the past 10 years as the Southern California Asian population has exploded. For example, Cathay Bank, Los Angeles' oldest Asian bank, has grown to a $632 million (assets) bank since it was formed 28 years ago.

California Center Bank's assets had grown by 29.7 percent to $168 million and its net income grew by 35 percent to $2.29 million in the third quarter of 1990, compared to same year-ago period.

Los Angeles General Bank has also experienced phenomenal growth in the past year and its assets have grown by 37 percent $731.9 million from $459 million in 1989, according to Sheshunoff Information Services Inc. of Austin, Texas. The bank's 1990 net income grew by 18.7 percent, to $9.5 million from $7.5 million, in 1989.

General Bank's President Li-Pei Wu said about his bank, "we do very basic banking. We look at credit very carefully and we achieve efficiency in overhead cost." The bank services Taiwanese immigrants conducting business in Southern California and other high net-worth individuals.

These institutions are also expanding beyond their roots in Chinatown and Koreatown. They have followed their ethnic constituencies out to Monterey Park, Alhambra and Hacienda Heights, where there are sizable Asian communities, said Peter Yue, president of First Public Savings Bank, based in Chinatown.

Depositors are attracted to the community banks because they offer a high level of service that can not be matched by other U.S. institutions. Besides offering multi-lingual and, in the case of the Chinese, multi-dialect, services, these institutions act as counselors for the customers non-banking needs as well - translating bills and helping fill out forms, explained John Lee, president of Chinatown-based Standard Savings Bank.

The S&Ls have had no difficulty complying with the regulations imposed by the Financial Institutions Reform, Recovery and Enforcement Act, passed by Congress in August 1989, because they have generally focused on loaning for residential mortgages. They have also avoided some of the pitfalls associated with residential home lending because of the reliability of their customers and high loan to value ratios. Monterey Park-based Trust Savings Banks, for example, has only had three foreclosures in its 10 years of operations, said bank president Mark Todd.

Some of these banks and thrifts have capitalized on built-in networks of contacts in their communities provided by family and district associations, in which membership is based on common last names and home counties in China. The Lee family association has more than 1,500 members, a close-knit group, according to John Lee of Standard Savings Bank.

Even as these banks concentrate on specific ethnic communities, some have attracted the attention of Wall Street. Cathay Bancorp Inc., Cathay Bank's parent company, recently started selling shares in the over-the-counter market. East-West Federal Bank was sold in 1989 to Phoenix-based Talley Industries, which has permitted the management to continue concentrating on immigrant communities. Since Hanmi Bank went public in early 1988, more than 17 percent of its stock is held by institutional investors.

PHOTO : Banks: Staying close to home