In the latest move by a midsize U.S. bank to expand abroad, Los Angeles-based Imperial Bancorp has opened a Hong Kong subsidiary to expand trade finance.

The unit, named Imperial Trade Services Ltd., will issue, advise on, and negotiate letters of credit for small and medium-size companies. About 40% of the letters of credit Imperial handles are for trade through Hong Kong.

Imperial, a $3.3 billion-asset banking company, is one of several smaller California banks that have responded to growing demand for international services amid rising Californian involvement in trade.

Peter Knudson, senior vice president and general manager of its international division, said Imperial has also gotten a considerable boost in business from customers disenchanted with service at institutions which have merged, He cited in particular Wells Fargo & Co.'s recent acquisition of First Interstate Bancorp.

"We've picked up a fair number of commercial customers as a result of the (Wells-First Interstate) merger," he said.

He cited Union Bank of California, a unit of Bank of Tokyo-Mitsubishi Ltd.; Sanwa Bank of California; Santa Clara-based Silicon Valley Bancshares, and a host of Asian community banks as among the banks competing for middle market international business.

Trade Bank, a trade finance bank set last year up by London-based HSBC Holdings and Wells Fargo, has also entered this market.

As part its own expanded international effort, Imperial last week struck an agreement with Citicorp under which the New York- based bank will handle processing for Imperial's trade finance operations.

"Foreign trade with California used to be dominated by aerospace and agriculture," Mr. Knudson observed. "Today, you have a much broader range of imports and exports by smaller and medium-size companies across a number of industries."

Imperial, the eighth-largest bank in California, focuses on companies with $10 million to $200 million in annual turnover. The bank caters to the textile and apparel trade as well as to the motion picture and entertainment industry. Around 60% of the more than 80 films Imperial helped finance last year were produced, distributed, or both abroad, the executive reported.

Since 1991, Mr. Knudson said, fees from international transactions excluding foreign exchange more than doubled, to $7 million in 1996. Revenues from foreign exchange have increased fivefold over the last two years, to $2 million.

Much of the increase in foreign exchange came from a decision to handle smaller transactions, of around $100,000 on average.

"This is not the kind of business big banks want to do," Mr. Knudson said. "Unless you want to do $5 million, they won't talk to you."

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