Eight years ago, First Union Corp. swore off international banking.

It got rid of the last of its problem loans in Latin America and shut down its offices in Tokyo and Dusseldorf, Germany.

Now the Charlotte-based superregional is going abroad again, but traveling in a very different way.

Rather than making risky cross-border loans, the $132 billion-asset bank is sticking to short-term trade finance, international corporate banking, and correspondent banking.

As part of its drive to expand international operations, First Union recently opened offices in South Africa, a joint venture in Hong Kong with Hongkong Chinese Bank Ltd., and a branch to handle trade finance in the offices of Indonesia's Lippobank in Los Angeles.

In some respects, First Union, like other superregionals, has been forced back into the international arena.

Growing exports by middle-market companies and an increase in the number of subsidiaries established or acquired by big foreign corporations in First Union's domestic territory have boosted demand for international services.

And this year's merger with New Jersey-based First Fidelity Bancorp has made the need for international services even more acute.

The acquisition gave First Union a network of branches stretching from Florida to Connecticut, as well as membership in IBOS, the Interbank On- Line System funds transfer association.

The deal also sharply increased First Union's share of middle-market customers, many of whom do business overseas.

Data compiled by Dun & Bradstreet for 1995 show First Fidelity and First Union together accounted for 37% of the nation's middle-market companies - nearly 41,000 companies whose annual sales fall between $20 million and $250 million.

"In the '70s and '80s, international banking meant something very different from what we look at today," said Andrew Oleksiw, senior vice president and managing director of First Union's international division. "And what it mainly meant was a quick way to build assets with a 200- to 300-basis-point spread."

After 1982, when Mexico defaulted on its debts to foreign commercial banks, triggering an international debt crisis, "regional banks pulled out," Mr. Oleksiw said. "They went from one extreme to another."

The return to international banking began in 1991, after First Union acquired Southeast Bank in Miami and Dominion Bankshares in Roanoke, Va. The two deals prompted the bank to reassess its boycott of international operations.

"We saw that we were the second-largest bank in Florida, after Barnett, and the largest in Miami," Mr. Oleksiw recalled, "and we started to ask ourselves: Maybe international is something we should be involved in.

"Don't forget, Florida and North Carolina are among the top 10 states in exports, and Miami is the gateway to Latin America."

Alongside a burgeoning foreign corporate clientele and a growing involvement in trade, First Union picked up another profitable international sideline: foreign embassies.

Although it's mainly a deposit-driven business, First Union has become, like Riggs National Bank, one of the biggest suppliers of banking services to embassies in the United States.

"Foreign embassies and missions are like small companies," Mr. Oleksiw said. "They have payrolls to handle, funding needs, foreign exchange requirements, and commercial mortgages."

Though earnings from their business are not large, he added, embassies often maintain substantial deposits at the bank.

At the top of First Union's current agenda are trade finance and correspondent banking, via some 1,300 other banks, especially in or near emerging markets.

The boom in First Union's trade finance business has been dramatic. At yearend 1992, it had only $73 million in commercial letters of credit outstanding, far down the list of banks helping finance exports and imports. After the merger with First Fidelity closed in January, the company had close to $500 million, ranking 12th in trade finance, behind Republic New York Corp. and just ahead of Norwest Corp.

Mr. Oleksiw, a 42-year-old New York native who came to First Union from NationsBank Corp. three years ago, said the success of First Union's international operations is somewhat dependent on the establishment of "meaningful relationships" with foreign banks. Branches and a correspondent banking network just won't cut it, he added.

He also noted that First Union's reentry into international activities was aided by 10 years of investments in technology.

"We don't have a lot of antiquated systems, so we were pretty much able to start using state-of-the-art" systems, said John M. Jourdan, senior vice president in the international division. "We weren't carrying a lot of excess baggage."

Analysts said First Union's push into international banking exemplifies an effort among regional and superregional banks to expand international and other commercial banking services.

"Industrial companies are seeking to consolidate the number of their bank providers," said Mike Mayo, a banking analyst at Lehman Brothers Inc. "That means companies are looking to banks for additional functions.'

Moshe Orenbuch, a banking analyst at Sanford C. Bernstein & Co., agreed. "They're dealing with bigger companies with more multinational operations, which have more need for those kinds of services," he said.

Analysts added that First Union also has an inherent advantage in supplying such services to middle-market customers, compared with potential rivals like foreign banks.

"It's hard to compete with a strong indigenous bank in these markets," observed George Bicher, an analyst at Alex. Brown & Sons Inc.

"Foreign banks can't deliver the kind of ancillary services which make a credit relationship profitable," he observed. Adding international activities, he said, are "logical" for First Union.

However, First Union has made no plan to invest in any foreign branch, Mr. Oleksiw noted. "The one thing we don't want to do is open a lot of offices around the world, hire a lot of people, and then do a lot of stupid things to justify our expenses."

After the bitter experiences of the 1980s, First Union is unlikely to wander much beyond the parameters it has set, even if its existing operations continue to expand.

This time around, "we intend to stay focused," Mr. Oleksiw said. "We don't intend to go into international capital markets, real estate lending, or international retail banking."

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