Sumitomo Pledges 10% of Assets to Aid Poor Areas : Finance: Japanese-run bank will commit $500 million to low-income housing and minority businesses in state.
In the largest commitment of its kind from a Japanese-controlled bank, Sumitomo Bank of California on Thursday unveiled an agreement to provide more than $500 million--a full 10% of its assets--in home and community development loans to neglected areas in California.
Sumitomo said it has made a 10-year commitment to make these loans in low- and moderate-income communities all over the state. The agreement came after lengthy negotiations with the Greenlining Coalition, a group of 19 minority and consumer organizations.
The agreement, which was spurred in part by criticism from the Federal Deposit Insurance Corp., also included commitments from Sumitomo to add minorities to its board, to donate 2% of net income each year to charity and to give between 20% and 25% of its contracting to businesses owned by minorities or the disabled.
The Sumitomo announcement is another in a series of well-publicized investments in the inner city by major corporations in the wake of the spring riots.
Community groups have been waging publicity battles for years to get big banks to do more for low-income and minority consumers and business owners, as called for in the Community Reinvestment Act of 1977. The riots have only accelerated their efforts.
Japanese-controlled banks in particular have been criticized for not making enough home loans to minorities and for not serving the inner city. San Francisco-based Sumitomo, for example, made only two home loans to African-Americans and six to Latinos in 1991, out of 180 total home mortgage loans.
Sumitomo President Tadaichi Ikagawa said that Thursday’s agreement “makes good business sense.”
“Our 10-year commitment is part of Sumitomo’s long-term strategy to be a leader in serving all of our California communities, including low- to moderate-income minorities who constitute a vital part of our business and the economy of California,” Ikagawa said.
“No other bank has done as much as Sumitomo,” said Robert Gnaizda, lawyer for the Greenlining Coalition, which has pushed for more community investment by banks. While other banks have committed more to such lending in total dollars--most notably Bank of America with $12 billion and Wells Fargo with $1 billion--Sumitomo’s commitment represents a larger portion of its total assets, he said.
Sumitomo’s announcement was met with both enthusiasm and skepticism.
“I hope others will look at this and wake up,” said Carlton Jenkins, managing director of Founders National Bank of Los Angeles, the state’s only black-owned bank. “Profit and lending in the inner city don’t have to be mutually exclusive.”
“Far be it from me to take potshots at another bank, but speaking as a consumer I think they have not done significant outreach,” Jenkins said. Sumitomo has “not been to any substantial degree a meaningful player in the economic empowerment of this community.”
Marva Smith Battle-Bey, executive director of the Vermont Slauson Economic Development Corp., had other reservations.
“I’m always excited and enthusiastic about people making a commitment,” she said. “But I don’t know if we can take that commitment to the bank--pardon the pun--because we just haven’t seen the evidence. . . . Are they really going to try to touch some of the businesses that have been shut out in terms of banking?”
Gnaizda said that Sumitomo’s commitment will be closely monitored by the Greenlining Coalition and by the Federal Deposit Insurance Corp.
He also said that he has meetings scheduled with several banks, including Japanese-controlled Sanwa Bank and Bank of California, to discuss agreements similar to the one with Sumitomo.
In the wake of last year’s riots, Sumitomo, the state’s seventh-largest bank, donated $50,000 to Rebuild L.A. and set aside another $100,000 for disaster relief and rebuilding in Los Angeles’ inner city. In addition, the company has agreed to provide $250,000 to the Southern California Business Development Corp., a multi-bank fund established to invest in small businesses in riot-affected areas.
Other large corporations also have responded to post-riot needs. Arco, for instance, made a $1-million capital investment in Founders National Bank and pledged to match up to $1 million contributed by other companies.
Under the agreement announced Thursday, Sumitomo also will add four minorities to its 18-member board as vacancies occur, will work to include more minorities in top management, will meet with community groups twice a year and will give up to 25% of its contracts to businesses owned by minorities and the disabled.
In addition, Sumitomo said it will give 1% of net income to charity this year, moving to a goal of 2% a year by 1998. Sumitomo also has agreed to set up a five-member minority advisory board. Members will meet quarterly with senior management and will be paid for their work.
