Taiwan Move in U.S. Banking Is Just a Start : Investment: Groups from Taiwan are buying banks to help support the growing Taiwanese business community here. The diversification marks a change in their strategy.

Twice a month, She-Ying Chin Wang climbs aboard a jet in Taiwan bound for Los Angeles. Upon arrival, the wife of one of Taiwan’s wealthiest and most influential business tycoons heads for Monterey Park to visit the headquarters of Omni Bank.

She’s no mere depositor. Mrs. Wang owns the bank with her husband, You-Theng Wang, chairman of the giant Rebar Group conglomerate in Taiwan, and their son.

Since they took control in April, Omni’s monthly profits have more than doubled and deposits are up, Mrs. Wang said, noting that it’s their first banking venture and first business in the United States.

“If Rebar takes a step here, there will be followers,” Mrs. Wang predicted.

Indeed. Freed of restrictions that prevented them from expanding overseas, government-owned banks from the island nation southeast of China are rushing to set up branches in the United States. Meanwhile, Taiwanese investors are shopping for U.S. banks to buy. Some Taiwanese already have interests in banks in New York, Washington and Seattle. And small, American-owned banks catering to Chinese-Americans are beginning to look over their shoulders at this new competition.

“In the last two to three months, I’ve seen seven or eight people from Taiwan come in with a blank check and say, ‘I want to buy a bank,’ ” said Donald H. Livingstone, Western region director of banking services at the accounting firm Arthur Andersen & Co. in Los Angeles. “There is no question that there will be a few acquisitions of local independent banks by Asian interests.”

The emergence of Taiwanese investors in American banking marks a new chapter in their overseas investment strategy, representing a diversification beyond their previous concentration in residential real estate. These new investors live and work mainly in Taiwan. By establishing a presence in the United States, they can service the growing number of Taiwanese companies coming to America.

“We’re expecting that after Taiwanese banks establish themselves here, their customers will make large acquisitions and set up operations here, same as the Japanese and Koreans have done,” said Wilford J. Copeland, who heads the international banking practice at the accounting firm of KPMG Peat Marwick in Los Angeles.

The move into U.S. banking is the result of deregulation of Taiwan’s closed and archaic banking system. The old banking laws, along with restrictions on interest rates and the ability to send cash overseas, helped spawn an illegal, underground banking system that Taiwan authorities are working to eliminate.

Now, Taiwanese banks--most of which are government-owned--are allowed and encouraged to open branches overseas to compete in international banking circles.

Private investors are being allowed to own banks in Taiwan for the first time. The government has begun accepting applications from investors to establish privately owned commercial banks but is requiring a minimum investment of about $380 million.

While Wang’s Rebar Group--a diversified company with annual revenue of $1.5 billion --awaits approval on its application to open a bank in Taiwan, it can get firsthand experience in banking through Omni. Rebar is the first of Taiwan’s 10 giant conglomerates, known as gee tuan , to acquire a full-service U.S. commercial bank.

Another factor is driving the giant conglomerates into banking. The industry, long confined to a small, elite group in Taiwan, is seen as prestigious.

“They feel as a big group, they are not complete unless they have a bank,” explained Alexander Pan, a senior tax associate at the accounting firm Coopers & Lybrand who has clients from Taiwan.

Taiwan’s move into overseas banking is also driven by the nation’s growing internationalization. Under U.S. pressure to reduce its $12-billion trade surplus with the United States--and holding $73 billion in foreign exchange reserves that are second in size only to Japan’s--Taiwan has initiated a series of changes designed to encourage capital outflows.

Three years ago, Taiwan lifted its foreign-exchange reporting requirements to allow individuals to take up to $5 million out of the country. Most Taiwanese investments in the United States initially went into residential real estate in Monterey Park, known as Little Taipei, and other parts of Southern California. This area is home to the largest population of Taiwanese in the United States. It also is a big center for U.S.-Taiwan trade.

“Taiwanese are relatively new to investing in the United States. For a long time, the Taiwanese were just exporting,” explained Ian C. Forsyth, a partner at Coopers & Lybrand who is representing several Taiwan investors interested in U.S. banks. “The whole thinking has changed in the last two to three years. They have to change from inbound to outbound.”

Now Taiwanese investors have begun to diversify, partly because of the sharp 35% rise of the Taiwan dollar against the U.S. dollar since 1985. The strong Taiwan currency has made U.S. investments less expensive.

“With the opening up and liberalization of the restriction on the flow of money out of Taiwan, the Taiwanese are looking for attractive investments around the world,” said Los Angeles attorney Harvey H. Rosen, who helps Taiwanese investors buy U.S. banks. “The United States, in particular California and banking, seem very attractive as initial investment opportunities to establish positions to move into other areas.”

Taiwanese investments here are becoming bigger. In Texas, for example, Formosa Plastics plans to build 28 petrochemical plants during the next three to five years at a cost of about $3 billion. Chinese Petroleum Corp., the Taiwanese national oil company, last month agreed to buy Huffington Corp., a Houston oil firm valued at about $500 million.

Taiwan banks realize that they, too, must internationalize to keep up with the globalization efforts by other Taiwanese companies. “We’re following our customers,” explained H. J. Tang, senior vice president and general manager of International Commercial Bank of China, which was the only Taiwanese bank allowed to open a Los Angeles office in 1984.

Since Jan. 1, government-owned Hua Nan Commercial Bank and First Commercial Bank have opened offices in Los Angeles. Chang Hwa Commercial Bank hopes to open its branch in Los Angeles by October. The three will focus on international trade financing.

Bank of Communications in San Jose, however, has a more specific target: high technology, which Taiwan hopes will become its new industrial base. The 80-year-old, government-owned industrial development bank has played a major role in Taiwan’s economic development from a low-cost manufacturer to a producer of high-technology products.

“Our branch here is the first, and we selected San Jose mainly because our customer base is located in this area and this will give us a better opportunity and access to technology-intensive industries,” explained S. T. Chang, senior vice president and general manager of Bank of Communications.

At least 100 or more Taiwanese companies operate in Silicon Valley, he said.

Meanwhile, two other banks are taking a broader approach. When the Wangs bought Omni Bank for $21 million, they acquired a 10-year-old full-service bank with branches in Monterey Park and Chinatown and customers drawn primarily from the surrounding Asian-American communities.

Mrs. Wang, a graduate of Oklahoma City College and a former TV talk show host in Taiwan, said Omni plans to expand but will continue to concentrate on four areas of lending: construction, consumer, international business and trade financing. Omni’s monthly profit in April more than doubled from March, to $142,000 from $66,000, said Mrs. Wang, who chairs Omni’s advisory board of directors. About a third of its $8 million in new deposits came from Taiwan.

In Seattle, much of the foreign capital helping to fund Washington First International Bank--the city’s first Asian-American-owned bank, scheduled to open later this month--is from Taiwan, according to Elizabeth Huang, the bank’s president. Taiwan investors also helped to fund Credit International Bank in Washington, D.C.

Meanwhile, in New York City near Wall Street, China Trust Bank was started a year ago by Jeffrey Koo and Kenneth Lo. Together they head China Trust Co., Taiwan’s largest private trust company.

So far the presence of Taiwanese banks is so new that their impact has not been felt. But small, locally owned banks catering to Chinese-American communities may soon feel the competition.

“They are trade-oriented for now,” explained Dunson Cheng, president of Cathay Bank, a locally owned bank with branches in Los Angeles, Monterey Park, Alhambra, Hacienda Heights, Westminster and San Jose. “It is logical for them to extend their business to domestic lending and perhaps finance real estate projects. This is a source of new competition.”

Cheng said the Taiwan banks have “a distinct advantage over us” because they can more easily pick up the banking business of U.S. affiliates of Taiwan companies.

“We are feeling (the competition),” Cheng said, “but we haven’t lost any business so far. But that will come. . . . Customers are telling us that officers from Taiwan banks are calling them.”