Sanwa Feeling Slowdown in Business Loans : Banking: A memo by the Japanese-owned California firm’s chief calls for more aggressive marketing and warns that cost cutting is coming.
Sanwa Bank California is experiencing such a slowdown in business loans that earnings could fall about 15% below the Japanese-owned bank’s target, the company told its managers in a recent memo obtained by The Times.
The disclosure is further evidence that commercial lending in California is slowing amid a cooling off of the state’s economy and tighter lending practices that some have attributed to tougher reviews by regulators. It also is the one of the first major signs of problems among some of the state’s Japanese-controlled banks.
In the July 9 memo, Sanwa Chief Executive Masahiro (Mark) Yoda said that commercial loan balances were off by more than $100 million from the bank’s target and that, as a result, Sanwa’s earnings could fall short of its $46-million target by $6 million. Last year, Sanwa--the state’s seventh-largest bank--earned only $19 million because it set aside money to deal with problem loans to developing countries.
In the memo, Yoda called for “midyear adjustments” that include unspecified cost cutting. He called for aggressive marketing to make sure “good lending opportunities are not missed,” but at the same time urged that the loans are prudent.
Robert H. Cooke, Sanwa’s senior executive vice president, confirmed the contents of the memo. He said lending to businesses is soft across the board, except for agricultural loans. He said Sanwa’s commercial loan balances are about $2.6 billion, out of $4.9 billion in loans overall.
Cooke did not specify where cost cutting will take place but said all departments are reviewing their expenditures.
Sanwa Bank California divides its headquarters and head office activities between Los Angeles and San Francisco.
It is owned by Sanwa Bank Ltd., which divides its headquarters and head office functions between Osaka and Tokyo.
With $6.9 billion in assets as of Dec. 31, Sanwa is the state’s third-largest Japanese-controlled bank. The two larger institutions, both based in San Francisco, are Union Bank, controlled by Bank of Tokyo, and Bank of California, owned by Mitsubishi Bank.
