Consolidation wave bypasses L.A.'s foreign banks.

The arrival of out-of-state banks into Southern California might strike fear into the competitive hearts of many local financial institutions, but one group that remains unfazed is L.A.'s foreign-owned banks and bank divisions.

Their lack of concern reflects a different business focus. Whereas most major U.S. banks are eyeing Los Angeles for its big consumer market and cache of corporate customers, foreign banks tend to concentrate on trade finance and business related to their home countries.

In fact, the only foreign banks in L.A. that appear to be at risk are a small minority engaged in the competitive retail banking business - where loans and other financial services are marketed to consumers, as opposed to businesses.

"The foreign banks prosper primarily because they have contacts in their own countries," said Dave Scott, chief examiner of California's Department of Financial Institutions.

"If you talk about what (the big U.S. banks) are doing, it's private and retail banking. Those are their big profit centers," he said.

Some 75 foreign banks have more than $50 billion combined in assets in their L.A. branches, making L.A. County second only to New York as an international banking hub. Many have avoided the retail business because U.S. banking laws require them to set up independent subsidiaries to enter the retail market.

Banks in California

Some of the biggest banks in the state are headquartered in Japan.
The following are the 10 biggest foreign-owned banks operating in
California, listed by total assets in state branches.

                                                    Assets
Bank                                         (In billions)   Country

1.    Industrial Bank of Japan Ltd.                  $6.02     Japan
2.    Bank of Tokyo-Mitsubishi Ltd.(*)                4.26     Japan
3.    Fuji Bank Ltd.                                  4.16     Japan
4.    Sakura Bank Ltd.                                3.12     Japan
5.    Dai-Ichi Kangyo Bank Ltd.                       3.06     Japan
6.    Long-Term Credit Bank of Japan Ltd.             2.40     Japan
7.    Sanwa Bank Ltd.                                 2.39     Japan
8.    Tokai Bank Ltd.                                 2.25     Japan
9.    Shizuoka Bank Ltd.                              1.63     Japan
10.   Mitsubishi Trust and Banking Corp.              1.61     Japan

* Bank of Tokyo-Mitsubishi Ltd. is the parent Union Bank of
California

Source: Department of Financial Institutions

In addition, many foreign branch managers said they have kept away from retail banking because the market is already too crowded.

"If we tried to do retail banking, it would be difficult to compete here," said Frank Lin, L.A. branch manager of Taiwan-based Farmers Bank of China.

Lin said that the majority of his business comes through relationships between his bank's headquarters office and its overseas customer base. Companies in Taiwan that do business in Los Angeles typically use the local branch to set up financing - a common occurrence at most foreign bank branches here.

"We don't feel much of a threat," Lin said. "Trade finance is our main business, and that mostly comes from our main branch in Taiwan."

Likewise, Jose Colayco, manager of the L.A. branch of Philippine Commercial International Bank, said major U.S. banks would have little interest in the market segment he serves, which consists mainly of Filipinos living in the United States who use the bank to send money back to friends and relatives at home.

"We also perform some back-room operations in support of the headquarters office's international trade transactions in the U.S.," Colayco said.

Because the U.S. operations of foreign banks tend to focus on niche markets, foreign banks will probably continue to set up branches in L.A. despite the growth of U.S. mega-banks, Colayco added.