Two L.A. Asian American banks near top of national stock ratings
Two of Los Angeles’ many Asian American banks ranked near the top of analysts’ national lists of bank stocks that investors should buy, a signal of economic strength in local immigrant communities.
Financial information provider SNL Financial ranked BBCN Bancorp second of all bank stocks nationally, with six of seven analysts, or 87%, rating Koreatown’s largest bank a “buy” or “outperform.”
Only the parent of South Carolina Bank and Trust had a more positive endorsement from analysts.
Cathay General Corp., the oldest Chinatown bank, held the No. 5 slot, with six of eight analysts issuing buy recommendations. Also in the top 20 were PacWest Bancorp of Los Angeles, a favorite because of its recent blockbuster acquisition of L.A.’s CapitalSource Bank; and wealth management specialist First Republic Bank in San Francisco.
Banks reporting higher first-quarter profits and increased lending so far include Cathay; East West Bancorp in Pasadena, the largest Chinese America bank; and BBCN, which on Tuesday reported its net income had risen 27% and new loans were up 35% during the quarter compared to a year ago.
It’s a welcome change for the banks, which were badly battered by the Great Recession and the collapse of the housing market. They have worked their way through the piles of bad loans produced by the bust and replenished their reserves of capital, a buffer against any new economic shocks.
Remnants of the recession continue to hold back bank customers, including many of the small-business owners who dominate the Korean American economy, said Hyepin Im, chief executive of the Korean Churches for Community Development, a nonprofit seeking to bridge economic and cultural gaps.
“Some individuals and businesses are coming out of it, but plenty are still struggling,” Im said in an interview.
Still, foreign investment is helping the economy to recover, she said. “If you’re hitting the bottom, the only way to go is up.”
Not all California’s regional banks are focused entirely in the state or on ethnic customers. City National Corp.’s entertainment banking and wealth-management operations reach across the country from Los Angeles. First Republic’s jumbo mortgage business operates nationally, as does the commercial lending arm at PacWest, parent of Pacific Western Bank.
But the regionals generally have avoided the worst of the pitfalls that continue to plague the major banks, such as bond-trading blow-ups, the end of a mortgage refinancing boom and exposure to a host of legal claims by investors and the government stemming from the mortgage meltdown.
JPMorgan Chase & Co., the nation’s largest bank, reported 19% lower first-quarter earnings as a result of those factors, and Bank of America Corp., the No. 2 bank, lost $276 million.
SNL noted that bank stocks as a group beat the overall market in 2012 and 2013, rising 77% as investors bet that rising interest rates would improve profit margins on lending.
With the stock prices up, investors this year are focusing on selecting banks that stand out from the crowd. Analysts are scouting for banks that operate in a fast-growing niche, are positioned to expand their operations rapidly, or can acquire other banks as the industry consolidates, Sterne Agee analyst Peyton Green wrote recently.
That sounds like a lot of California regionals, said Keefe, Bruyette & Woods analyst Julianna Balicka in San Francisco.
Asian American banks have benefited from the entrepreneurial culture among immigrants here and from the flood of wealth from China and Korea, she said. Among other things, she noted, many Asian American banks have increased their mortgage lending as a result of the influx of immigrants and cash, defying the general trend.
A surge in EB-5 visas — which give wealthy foreigners a pathway to citizenship in return for job-creating investments in the U.S. — is among the factors increasing opportunities for the Asian American banks, Balicka said in an interview.
Aaron J. Deer, a San Francisco-based analyst for Sandler O’Neill, said banks across the country are performing better — but they are doing especially well in California.
“That reflects our improving economy, with healthy real estate trends coming back,” Deer said in an interview.
With job growth strengthening, demand for business loans finally increasing and banks having shed most of the loans that went bad during the recession, the future looks good for the regionals, Deer said.
“The bulk of the improvement is yet to come.”
Twitter: @ScottReckard
