Sohn Expected to Shine Over Hanmi Financial
One good acquisition sometimes leads to another.
Hanmi Financial Corp. emerged as the clear leader in Korean American banking last year when it took over rival Pacific Union Bank. The resulting heft allowed Hanmi Bank’s parent to achieve a longtime goal by hiring Wells Fargo & Co.’s high-profile chief economist, Sung Won Sohn, as its president and chief executive.
“Hanmi had been talking to me for more than 10 years,” said Sohn, who took the reins Monday. “But in the past the bank was just too small.”
Analysts said netting Sohn was a coup for the business-oriented bank, which has its headquarters on Wilshire Boulevard in Koreatown and 20 full-service branches from San Francisco to San Diego.
“Not only does Dr. Sohn bring tremendous potential in terms of mainstream business relationships but also a loyal following of Korean Americans, some of whom view Dr. Sohn as the Korean version of Alan Greenspan,” wrote analyst Kathleen L. Steinbrecher at Piper Jaffray & Co.
Steinbrecher on Monday reiterated her “outperform” rating on Hanmi, citing Sohn’s arrival. And the bank’s stock jumped by nearly 5%, rising $1.71 to $37.65 on Nasdaq.
Sohn, 60, stands to benefit if that upward trend continues. He’ll make at least $825,000 in salary and bonus in his first year -- and his contract says he’ll be showered with stock options worth millions of dollars if he can double and quadruple Hanmi’s earnings and stock price.
To make that happen, Sohn said, his first goal was increasing the number of services performed for each customer, a Wells Fargo specialty. By anticipating needs and “cross-selling” financial products -- a mantra of Wells Chairman and CEO Richard Kovacevich -- banks create tighter bonds with clients even as profits rise “exponentially,” Sohn said in an interview.
Longer term, Sohn expects Hanmi to open additional branches, first on the West Coast. The plan is to use Hanmi’s experience in “hand-holding” levels of service to appeal to immigrants, mainly those from South Korea but also new arrivals from other Asian countries and the Middle East, he said.
He hopes to see Hanmi grow from its current $3.1 billion in assets to $10 billion by the time his contract runs out in six years.
To help accomplish that, Sohn said, Hanmi must attract and retain talented executives from mainstream banks as well as among Korean Americans. The bank, he said, has been a “graduate school for Korean bank executives” who departed to help run major Los Angeles-based rivals such as Nara Bancorp, Center Financial Corp. and Wilshire Bancorp Inc.
Executives and directors at Hanmi said they were confident Sohn could reverse that trend.
“Dr. Sohn is the most prominent Korean American banker in the world, and he will get people to migrate to Hanmi,” said William J. Ruh, co-founder of Castle Creek Capital, a Rancho Santa Fe, Calif., firm that specializes in small-bank mergers. Castle Creek financed the Pacific Union deal, and Ruh joined Hanmi’s board last spring.
Sohn replaced former Hanmi President and CEO Jae Wahn Yoo, who won praise for helping engineer the $295-million Pacific Union deal last year. Hanmi executives said Yoo, halfway through a three-year contract, was negotiating his severance package.
Ruh noted that Sohn’s move from Wells to Hanmi was front-page news in his native South Korea, where the press has closely followed his career.
After leaving Seoul as a teenager, Sohn picked up a Harvard MBA and a doctorate in economics from the University of Pittsburgh, then landed on President Nixon’s Council of Economic Advisors -- all while in his 20s -- before joining Norwest Corp., the Minneapolis bank that took over Wells Fargo and adopted its name in 1998.
After more than 30 years at Wells and in Minnesota, Sohn said, he was keen for a career, and geographic, change. He had always anticipated retiring in Southern California because of its weather, relative proximity to Asia and Korean American population, the largest in the nation. This was also a plus for his wife, Soon, and their 9-year-old son, Andrew.
At Wells, Sohn became known for short and snappy observations, made in interviews with major newspapers and on CNBC shows such as “Morning Call.”
With business borrowing stalled and interest-free financing on cars propping up the economy in late 2002, for instance, Sohn warned against relying on consumers for too long: “There is a limit to how many new cars you need.”
In the interview, Sohn said he would be the banker equivalent of football coaching legend Vince Lombardi, focusing Hanmi 80% on defense -- retaining its core clientele -- and 20% on offense, moving into new markets such as the Inland Empire, additional West Coast cities and ultimately New York, Chicago and other big ethnic markets.
Investors increasingly have taken note of Asian American banks, which are admired for their high growth rates and low loan delinquencies.
Hanmi’s stock rose 81.8% last year, from $19.77 to $35.94 a share on Nasdaq, while a broad index of Nasdaq banking stocks rose 11%.
Sohn will labor amid increasing competition, as smaller ethnic banks and Asia-based banks bump heads with big U.S. institutions attracted to the lucrative market, predicted Dominic Ng, chairman and chief executive of East West Bancorp in San Marino, a leading Chinese American bank.
“Some of the competition doesn’t know what they are doing -- it’s a herd mentality, like the dot-coms,” said Ng, predicting an eventual shakeout. “There’s a lot of players, and not everyone can be successful. But it will create a lot of noise, and somewhat of a hardship” for even the best banks in the niche.
“That’s what I like about Hanmi taking this kind of step to bring in a marquee player,” said Ng, who isn’t acquainted with Sohn but knows him by reputation. “They’ll get some instant credibility and differentiate themselves away from other players.”
