There are few things more American than the dream of owning a business, but that hasn't slowed foreign-owned banks from pushing heavily into the growing market.

From Amsterdam to Tokyo, foreign banks and their well-capitalized U.S. affiliates have accounted for less than 5% of all commercial and industrial loans of $1 million or less.

But they play larger roles in local markets from Jersey City to Chicago and Los Angeles.

Cynthia Glassman, a managing director with Furash & Co. of Washington, D.C., said these banks are drawn to the market for the same reasons domestic banks are -- big profit potential.

"For the most part, the foreign owners of these banks want them to be competitive with other U.S. banks," she said. "So they expect them to develop strategies that will help them be successful and competitive in this market."

For National Westminster Bank PLC's U.S. affiliates, that means working in conjunction with its 325 branches in New York and New Jersey to develop relationships with small businesses.

"Its needs-based selling," said Neil Metviner, a senior vice president in the commercial banking division of National Westminster Bancorp. "We're trying to tailor our sales and service to the needs of our customers."

The London-based banking company's New Jersey and New York affiliates had the largest combined portfolio of commercial and industrial loans of less than $1 million of any bank in the U.S., foreign or domestic. At June 30, the two banks reported $1.46 billion in small business credit.

While stressing that the bank serves an American market, Mr. Metviner said the bank is willing to invoke the reputation of its British parent. That can be helpful when marketing to the growing number of small firms looking to expand abroad.

"I think it does help us to some degree in that we have some strong international financing capabilities," he said.

Wholesale banking has always been the trademark at Chicago's LaSalle National Bank, an affiliate of ABN Amro Holdings N. of Amsterdam.

Together with its other U.S. subsidiary, European American Bank in Uniondale, N.Y., the Dutch-owned bank had nearly $830 million in small commercial loans outstanding at June 30. That was third highest among foreign-owned banks, just behind San Francisco-based Union Bank, a unit of Bank of Tokyo.

Norman Bobins, LaSalle's president and chief executive, said community reinvestment concerns led the bank to put its small-business operations into a separate division. But with nearly $400 million loaned out, the bank plans to stay in the business.

"One of our motivations is that if you're going to be a middle-market lender you have to be able to start serving these companies early on," Mr. Bobins said. "That's because big forgs grow from little tadpoles."

Despite their offshore ownership, many of these banks discourage the idea that they are foreign banks. Most, like Buffalo-based Marine Midland Bank of Buffalo, stress local roots.

The bank, owned by the Hongkong and Shanghai Banking Corp., ranked high among foreign-owned banks and 14th among regional banks with nearly $723 million in small business loans outstanding as of June 30.

The bank maintains that it is a local bank that has served Buffalo and northwestern New York State since 1812.

"In our market in western New York, we've been one of the largest SBA lenders for 20 years, long before we were bought out by a foreign bank," said Pat Wood, a spokeswoman. "The bottom line is we see ourselves as a local bank.

Likewise, Russell Cree, a vice president and manager of Sanwa Bank of California's small business unit, said foreign ownership is incidental to the bank's mission.

"We may have Japanese ownership, but we are an American bank and we are serving American companies," he said.

Still, foreign-owned banks prefer established names over globally known names. Banque Nationale de Paris kept San Francisco-based Bank of the West's name when it bought the $3.9 billion asset unit.

Fred Bailard, a senior vice president in the bank's business services division in San Francisco, said strategy is created locally with oversight from the parent.

"The bank has taken a very proactive stance in offering small-business products to meet the need of these companies," said Mr. Bailard, whose bank began pushing into the market in 1992.

The bank's $82.6 million portfolio of small commercial loans placed 23rd among foreign-owned banks. But at least one outsider says the bank's strategy have given it a niche in the competitive northern California market.

"They have a long-term approach to lending and a very good credit culture," said Dennis McQuistion, a Dallas-based bank consultant who has advised the company. "They are concentrating on getting quality people making quality calls."

That's not to say everybody is doing things right. Mr. McQuistion said that some foreign-owned banks in California have major problems in their portfolios.

The problems are exacerbated by new entrants trying to gain market share by loosening credit terms and cutting prices.

Many borrowers don't care who is doing the lending. Indeed, foreign-owned banks hope to breed loyalty. Sanwa's Mr. Cree said the bank was able to pick up market share in the agricultural regions of California during the last recession.

While some domestic competitors reduced their presence in the region, Sanwa was able to build its niche in agribusiness lending. Despite a rebound in the economy and renewed interest in that market, Mr. Cree said Sanwa's is holding its own. "The loyalty among our customers has been strong," he said.

Foreign Investments

Domestic banks aren't the only ones getting in on the small business loan market. Foreign-owned banks are aggressively pushing into the market for commercial and industrial loans of $1 million or less NumberForeign parent and U.S. subsidiarles of Loans ValueNational Westminster PLC, London 49,440 $1.5 billionNational Westminster Bank NJ, Jersey CityNational Westminster Bank USA, New YorkBank of Tokyo 2,521 $1.2 billionUnion Bank, San FranciscoBank of Tokyo Trust Co., New YorkABN Amro, Amsterdam 13.478 $827 millionEuropean American Bank, Uniondale, N.Y.LaSalle National Bank, ChicagoHSBC Holdings PLC, London 9,656 $723 millionMarine Midland Bank, BuffaloBank of Montreal 4,639 $501 millionHarris Bank and Trust, Chicago

Source: AB research

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