Sumitomo Is Pumping $180 Million Into Calif. Unit to Cut Nonperformers

Sumitomo Bank of California said it has been promised up to $180 million in fresh capital by its Japanese parent, Sumitomo Bank Ltd., to reduce remaining problem assets and diversify operations.

Tadaichi Ikagawa, Sumitomo California's president, said the bank hoped to trim its remaining bad loans and other nonperforming assets as well as the expense of carrying them. This, he said, would permit the California bank to "concentrate all of our resources and energy on moving ahead in building more profitable lines of business."

Sumitomo California, a $5 billion asset-bank based in San Francisco, has been handicapped for several years by nonperforming loans, particularly in commercial real estate.

Like other Japanese banks in California, Sumitomo lent too much money for real estate development and was badly hit when California went into a recession and prices slumped.

As of yearend, Sumitomo California had $208 million in nonperforming loans and assets, down from $269 million a year earlier. Nonperforming loans equaled 2.85% of all loans, while nonperforming assets came to 4.88% of total loans. Although that's down from 4.39% and 6.01%, respectively, executives said the amounts are still too high and are dragging down earnings.

"There's been fairly significant progress, but we want to put this behind us once and for all," said Kyle Tasumoto, vice president and corporate secretary. "It involves a huge amount of expense and takes people away from focusing on bringing in new business."