Flush with capital from the Treasury Department, executives from several Asian-American banking companies in California say they may be ready to explore deals again.
The chief executives of UCBH Holdings Inc. in San Francisco and East West Bancorp Inc. in Pasadena, both of which cater to Chinese-Americans, say they need clarity on asset quality at potential targets, though the government funding has given them incentive to look.
Executives at Nara Bancorp and Wilshire Bancorp Inc., two Korean-American firms based in Los Angeles, also sound more open to the idea now that their firms have gotten capital.
All four are among a group of Asian-American companies in California that had been active acquirers before the credit crisis took hold. So is Hanmi Financial Corp., which serves Korean-Americans but has capital issues, and analysts say it may find itself a target if it fails to receive government money.
Thomas S. Wu, the president and CEO of the $13 billion-asset UCBH, said, "Banks who have received capital will now be in a much better position to consider acquisitions in 2009."
However, Mr. Wu and Dominic Ng, the CEO of the $11.7 billion-asset East West, say acquirers need to exercise extreme caution when evaluating targets.
"There are still a lot of banks that have not fully recognized their credit exposure, and so we don't want to jump into the market too quickly and end up getting a financial institution that may have more substantial writedowns," said Mr. Ng, whose company received $306.5 million from the government. "But we can also buy tomorrow if the right bank comes along."
Mr. Wu expects dealmaking to pick up in the second half. Once "the dust settles down and we get more clarity" on the asset quality of targets, "valuations will become more attractive." His company received $298.7 million from the Treasury's Capital Purchase Program and an additional $29.9 million last month by issuing 6.2 million shares to China Minsheng Banking Corp. Ltd., whose stake in UCBH grew to nearly 10%.
Nara, which received $67 million from the Treasury, and Wilshire, which received $62.2 million, both say they are interested in deals. Joanne Kim, the CEO of the $2.6 billion-asset Nara, and Lonny Robinson, the chief financial officer of the $2.4 billion-asset Wilshire, said there are a number of acquisition candidates in Los Angeles' Koreatown, as well as in Korean-American communities in cities like Atlanta and New York. Neither executive would identify potential targets.
Brett Rabatin, a senior bank analyst with First Horizon National Corp.'s FTN Midwest Research Securities Corp., said Korean-American companies that have applied for Treasury capital and have yet to receive it are likely at the top of the list of potential sellers. He cited as examples the $3.8 billion-asset Hanmi and the $888 million-asset Saehan Bancorp, both based in Los Angeles' Koreatown. Regulators have ordered Hanmi, which lost $98.3 million in the first nine months of last year, to increase board oversight and maintain capital levels. The company applied for $105 million of Treasury capital but has not received word about its request. Hanmi would not discuss the matter last week, but a source close to the company said it may consider selling itself this year.
Daniel Kim, Saehan's CFO, said last week that it is strong after raising $13.9 million of common stock. "We are obviously not in the stage of selling the bank at all." Saehan has applied for $24 million of Treasury capital but has not received an answer.
Analysts say that consolidation in Los Angeles' Koreatown banking industry has proven elusive. Though the market is overcrowded — there are 14 banking companies with headquarters in a two-block area — boards have not shown a willingness to sell, in part because the position of bank director is considered prestigious within the Korean-American community, according to analysts.
Ms. Kim said Nara would also consider buying mainstream banking companies in Southern California, particularly if it gets government assistance for deals.
East West also said it is interested in deals for mainstream companies in Southern California, and Mr. Wu said UCBH is interested in the New York market. Neither executive would identify potential targets.
Chris Stulpin, an analyst at D.A. Davidson & Co. in Portland, Ore., said all would-be acquirers within the Asian-American sector should move slowly, at least this quarter, to see whether their own balance sheets will be affected by a spillover of asset deterioration from residential construction lending into commercial real estate. Among Chinese-American banking companies, Cathay General Bancorp in Los Angeles is in the best position to move first, because it has been less affected than others by the housing meltdown, he said. Cathay General officials would not comment for this story.
