The announcement that Sumitomo Bank Ltd. wants to sell its California operations has analysts betting that other troubled Japanese banks will follow suit.
They suggest that such a development will present buying opportunities for U.S. banks in California and other states.
"This will intensify consolidation in California and certainly raise premiums, not lower them," said Charlotte Chamberlain, an analyst with Jeffrey Group, Santa Monica, Calif. "This would be particularly good news for commercial banks and thrifts in the state."
The speculation comes amid tough times for Japanese banks, which are plagued by mounting bad loans and growing capital shortages.
This month, Sumitomo confirmed it was looking for a buyer for its $5.2 billion-asset California retail banking unit, Sumitomo Bank of California.
Observers expect more of the same from other Japanese banks.
Among the likely candidates for sale, according to analysts and consultants: CIT-Group, the U.S. commercial finance unit of Dai-Ichi Kangyo Bank Ltd., which owns 75%; Heller Financial Inc., the Chicago-based commercial finance business controlled by Fuji Bank Ltd.; Sanwa Business Corp. and Sanwa Bank of California, both units of Sanwa Bank Ltd.; and Union Bank of California, a unit of Bank of Tokyo-Mitsubishi Ltd.
Several New York-based Japanese trust banks could also be closed, observers said.
"I would anticipate more Japanese banks will sell properties or wind down asset-based businesses in order to free up capital," said James M. McCormick, president of First Manhattan Consulting Group.
Executives at several Japanese banks were unavailable for comment.
Norihiko Kato, vice president in charge of planning at Bank of Tokyo Mitsubishi Ltd., said his bank "had no plans at the moment" for putting its California unit, Union Bank of California, up for sale.
Mr. Kato declined to speculate about possible future decisions.
A spokesman in San Francisco for Sanwa Bank's U.S. retail unit, Sanwa Bank of California, denied that any sale of the California operation was under consideration.
"Our commitment to California has never been stronger," the spokesman said.
But he also confirmed that the bank is planning to cut staff and end unprofitable operations, such as underwriting U.S. government bonds at its capital markets subsidiary, Sanwa Securities.
Similarly, in a public offering by the CIT Group last month, Dai-Ichi Kangyo said it plans to continue to hold all of its current shares in the U.S. company. Keeping its options open, the Japanese bank also cautioned that it "is not subject to any contractual obligation to retain its controlling interest."
Although Japanese banks are understandably reluctant to discuss their plans in the United States, many have already embarked on a retreat in the U.S. market.
New York State Banking Department filings show that no fewer than 13 Japanese banks have closed either representative offices, branches, or trust banking companies in the state over the last 18 months.
An even bigger indication of the Japanese pullback in the United States has been the sharp reduction in assets held by the U.S. branches and agencies of Japanese banks.
Over the last two years, Sumitomo Bank Ltd. has cut assets from nearly $40 billion to $25.7 billion; Sanwa Bank has cut assets from nearly $40 billion to $18.2 billion; and Sakura Bank has slashed its U.S. assets to $11 billion from $17 billion.
The Japanese retreat contrasts sharply with the situation only a few years ago. Fueled by cheap capital and low-cost deposits at home, Japanese banks piled into the United States, declaring they were here "for the long term."
As part of this expansion, Japanese banks sharply increased their holdings of U.S. government securities and loans, opened branches and agencies in major cities around the country, and acquired banks in California and primary dealerships in government securities. In 1986, Sumitomo also spent $500 million to acquire a 12.5% stake in Goldman Sachs & Co.
The heft of Japanese banks and their fast expansion triggered fears they would soon gain a major share of the U.S. financial markets the same way they grabbed a major part of the U.S. automotive and electronics markets.
In a work published in 1987 entitled "The Second Wave: Japan's Global Assault on Financial Services," Richard W. Wright, a professor of international business and finance at McGill University in Montreal, and Gunther A. Pauli, a Belgian international business consultant, warned:
"Ten years ago the Japanese took the world by surprise with a frontal assault on world consumer electronics, automobile, motorcycle, and photographic markets.
"This time, they have targeted the financial services sector as their area of conquest, and once again it appears that the West will be taken completely by surprise."
Subsequent events proved such forecasts off target. Though big in terms of assets, Japanese banks stuck mainly to low-margin syndicated lending to multinational corporations that produced only limited profits. Several, including the California retail banking units and Heller Financial, also ran into severe losses, especially on real estate-related lending, forcing their parent companies to pump in millions of dollars in fresh capital.
As a result, analysts said, Japanese banks have had little to show for their efforts and little justification for retaining big U.S. operations here, given the heavy losses they have suffered at home.
Financial turmoil in Southeast Asia, where Japanese banks have been heavy lenders, can only add to the pressures for a sale of U.S. assets, analysts added.
