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SMALL BUSINESS | JAMES FLANIGAN / ON SOUTHERN CALIFORNIA

Immigrant Banks: A Model for Asia, a Boon to Us

January 14, 1998|JAMES FLANIGAN

Li-pei Wu, chairman of General Bank, an institution founded by and catering to Taiwanese immigrants, says the crisis in Asia hasn't affected the business of his highly successful bank very much at all.

Other immigrant banks, such as the California Korea Bank, report similar calm. One reason is that local banks' exposure to foreign trade lies mainly in letters of credit financing for importers of goods from Asia, and that business has improved thanks to currency devaluations.

Nor has the turmoil brought any rush of capital from nervous Asian depositors to local banks.

What that signifies is that Southern California's immigrant banks, like institutions set up to serve newcomers through the centuries, find their business focused on the new country, not the old.

Such banks are forced to diversify their clients and their lending. And this makes them a dynamic source of financing for small business throughout Southern California.

General, which has grown to $1.5 billion in assets, is bidding now for business among Armenian, Iranian, South Korean and Israeli entrepreneurs. Soon Wu will set up a new bank, under the GBC Bancorp holding company that owns General, to cater to Latino communities.

"We felt our success should be applicable to many first-generation immigrants because their background and thinking are really quite similar," says Wu, 63, who came to the U.S. in 1968 to earn a master's degree in business from tiny Fort Hays State University in Kansas.

Wu also went north three years ago to set up General Bank offices in Silicon Valley and find ways to lend to high-tech start-up firms. "We feel that technology is going to become the main industry of the United States. We have to lend to technology companies while insulating the risk," Wu says. So General makes bridge loans to start-up companies, cooperating with venture capital firms who understand advanced technology businesses far better than bankers could.

General was helped by Taiwanese entrepreneurs to make connections with venture capital firms. On the other hand, it was too many loans to Taiwanese immigrants buying real estate that forced General to diversify.

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In 1994 and '95, General's income fell and its loan loss provisions soared as Southern California real estate values tumbled. Wu, who took command at General in 1982, when the fledgling bank was in trouble in the recession, knew that over-concentration was the problem. He began the diversification program in earnest, bringing in senior bankers from the Armenian and Iranian communities to help.

Now General is back, planning to open loan production offices in Seattle and New York, and looking for a small bank to acquire to help it reach Wu's goal of doubling assets to $3 billion within five years. The goal is not too ambitious, says analyst Charlotte Chamberlain of Jefferies & Co., a Los Angeles brokerage. "General is one of the best-managed banks in the U.S."

Other immigrant banks, including Cathay Bancorp in the Chinese community, Nara Bank and California Korea bank in the Korean community and California Commerce Bank, which is owned by Banamex of Mexico, are also doing well. California Commerce handles money transfers to Mexico and Central America for Latino immigrants, finances trade with Mexico and plans to broaden its lending in the region.

"Our immigrant banks are good models for Asia to study," says Ken Ackbarali, banking expert at the Los Angeles Economic Development Corp. Ackbarali is alluding to the many problems in Asian economies that have resulted from banks over-lending to construction projects or government-favored borrowers. Under U.S. bank regulation, that couldn't happen. Instead, banks are required to diversify loans and make special efforts for small business.

"That's why China is studying U.S. banks and the Federal Reserve as a model for its system," Ackbarali says.

It's down-to-earth banking. Dominic Ng, president of San Marino-based East-West Bank, an institution with $1.7 billion in assets that now makes the majority of its loans beyond the Chinese immigrant community, says immigrant banks have advantages in lending to small business. "We understand family business relationships and culture carried from the old country," he says.

Immigrant companies also are down to earth and able to see how things really are amid the shouting about Asian crises. Chuck Chen, whose Walnut-based company, Ocean Interface, assembles CD-ROMs and network cards made in Taiwan for computers sold in the U.S., notes that Taiwan's currency has been devalued 25% recently.

"But we don't see price movements like that," Chen reports. "Maybe we get a 10% discount, and that will even out and disappear in six months because Taiwan has to import U.S. machinery and parts to make what they send to us."

The fact that an entrepreneur like Chen, and the bankers who lend to such entrepreneurs, see business as usual indicates a strength and adaptability in this region.

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There is something else, too--a personal touch among immigrant bankers and business people. Wu does not say so and none of the publicity handouts for his bank say so, but he is renowned in the Chinese community for philanthropy. Wu grew up poor in Changhwa, Taiwan, got his training in the bank there before immigrating to a small city in western Kansas. Now he gives millions of dollars every year to finance U.S. education for Taiwanese students.

The economic strength gathering today in Southern California is simply awesome.

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James Flanigan can be reached by e-mail at Jim.Flanigan@latimes.com

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