Hongkong & Shanghai Bank. The name conjures up exotic images of international finance amid the hustle and bustle of two of East Asia's most exciting cities.
But the Hong Kong-headquartered bank--Asia's largest outside Japan--has its sights set across the Pacific on Southern California. Hongkong Bank next month is moving its West Coast headquarters to its downtown Los Angeles office from San Francisco, where it opened its first U.S. office 110 years ago. It will continue to operate both offices.
The move was prompted because "we discovered the business growth in Southern California has been far greater than in San Francisco," P. Dicky Yip, executive vice president and West Coast manager of Hongkong & Shanghai Bank, explained in a recent interview.
The bank is targeting its commercial and trade lending activities in Los Angeles on local, mid-sized firms doing business in the Pacific Rim area.
Hongkong & Shanghai Bank, which owns 51% of Marine Midland Bank, thus becomes yet another West Coast lender to zero in on transpacific commerce. Major California banks are moving quickly into Pacific trade financing, bankers say, while also going after business in their local Asian communities.
Focus on Asian Communities
They idea, bankers said, is to forge transpacific links that are likely to build on each other and generate additional business.
Union Bank of Los Angeles, for example, has focused its international activities primarily on Asia. At the same time, its San Francisco office is offering specialized services to members of the local Asian community.
And Los Angeles-based Security Pacific Bank, which has said it plans to have "major strengths throughout the Pacific Rim," last September bought California Pacific National Bank, a small Los Angeles bank that primarily serves the city's Chinese business community.
To accommodate its expanding Southern California business, Yip says, Hongkong & Shanghai Bank's Los Angeles office now has a staff of 40, up from 25 two years ago. The bank's clients are mainly private companies in manufacturing and importing businesses that range from toys to electronics to garments.
"Many are newly arrived Hong Kong companies, which are familiar with our bank in Hong Kong," he explained. "Others are companies here that want to expand their business."
The changes in the bank's U.S. activities come amid an up and down economic performance in Hong Kong.
Peter Wrangham, general manager of the Hongkong & Shanghai Banking Corp., parent of Hongkong & Shanghai Bank, recently told a group of Southern California business people during a visit to Los Angeles that Hong Kong is conservatively projecting a 6.2% growth in gross domestic product in 1987. However, he said he believes that the increase will actually be greater, though perhaps not as large as last year's 9%. In 1985, the British Crown colony's economy experienced virtually no growth.
Tighter Banking Rules
In banking matters, Hong Kong authorities have tightened regulations because of problems with some local banks. The government had to step in and take over five troubled banks--all of which were locally incorporated by Malaysian investors. "No depositors lost money, but the government and shareholders lost money," Wrangham said.
New banking requirements mean that foreign banks seeking licenses in Hong Kong must have net assets of at least $14 billion, up from $12 billion. Local banks, which must have net assets of $12.8 million, are now under stricter review by Hong Kong authorities.
In addition, Wrangham said in an interview, "U.S. and British interests are trying to get an international basis for . . . basic regulations for banks. This is welcomed. Every country has its own regulations that differ considerably."
At the end of 1986, the number of licensed banks in Hong Kong--those that can accept checking and savings accounts--totaled 151, up eight from the year before. By the beginning of this month, four more banks had been licensed. Foreign banks own 123 of the colony's total 155 licensed banks. In addition, 140 other foreign banks operate offices in Hong Kong.
Addressing a question about capital flight from Hong Kong since China and Britain agreed in 1985 that the colony would revert to Chinese control in 1997, Wrangham said the Chinese have never put all their wealth into one thing. "They have consistently spread it around." He said the proportion of Hong Kong's wealth being sent abroad is probably the same as in the past.
Meanwhile, he said, the Hongkong & Shanghai Bank is continuing its search for a European bank acquisition, having been unsuccessful in an attempt to buy the Royal Bank of Scotland.