Sanwa, Tokai to Merge Under New Name


Sanwa, a familiar brand name in California banking for three decades, is about to disappear.

Sanwa Bank California, the fourth-largest bank based in the state, is merging with the much smaller Tokai Bank of California to form United California Bank. The deal is set to be completed Monday.

Sanwa and Tokai are privately owned and both banks have specialized in the relatively small market for commercial customers involved in Pacific Rim trade. For those reasons, the merger is expected to have little effect on either the value of other bank stocks or California's banking industry in general, said Charlotte Chamberlain, a bank analyst at Jefferies & Co.

"I just don't see this as something that's going to be particularly heart-stopping for investors in large commercial banks," she said.

With combined assets of more than $11 billion, the new institution would be the third-largest California-based bank--but a very distant third. Wells Fargo Bank and Union Bank of California, both based in San Francisco, have $115 billion and $35 billion in assets, respectively.

In terms of California market share, it would rank seventh among all banks, including out-of-state institutions such as Bank of America.

The merger is a marriage arranged by Japanese parent companies Sanwa Bank Ltd. and Tokai Bank Ltd., which are uniting with Toyo Trust & Banking Co. to create a $780-billion institution called United Financial of Japan Holdings Inc.

Bank officials expect a smooth transition in California, spokeswoman Madeline D. Sell said. "The operations at Sanwa will pretty much be the same," she said. Ryosuke Tamakoshi, president of Sanwa, would head the new bank.

One obvious change, however, would be the name. In Sanwa's case, the bank is giving up a name that it has used since its inception in 1972 and that has graced its 52-story headquarters in downtown Los Angeles for more than a decade.

The purpose of the name change is twofold, Sell said. First, the new name is similar to that of the Japanese parent company. Second, it is part of a larger strategy, which would include a $9.5-million advertising campaign, to promote the bank throughout the state.

"It's a generic enough name that it could broaden the marketing appeal of the new organization," said Norman Katz of MCS Associates, an Irvine-based bank consulting firm. Indeed, the name is similar to that of some existing banks, including San Francisco-based United Commercial Bank, which already has trademarked the initials UCB. And it's the name the former First Interstate Bancorp, which was acquired by Wells Fargo & Co. in 1996, was known by in the 1970s.

United California also plans to offer improved online services and increase the number of branches that specialize in Pacific Rim banking, said spokesman Chuck Champlin.

Both Sanwa and Tokai have established themselves as banks with a focus on the Japanese American and Chinese American communities, and as financiers of businesses involved in trade between Asia and the U.S., Champlin said.

However, even if United California Bank expands its Pacific Rim business as planned, it would probably have little effect on California's banking industry, analysts said. Most big American banks see Asian trade as too risky and have shied away from that arena, said Chamberlain of Jefferies & Co.

Sanwa, with more than $9.3 billion in assets, has 108 branches stretching from the Bay Area to San Diego, with a focus on Southern California. L.A.-based Tokai, the 22nd-largest California-based bank with $1.9 billion in assets, has 12 branches and three loan production offices, mostly in Los Angeles and Orange counties.

United California Bank would close five overlapping branches. Over the 18 months, it would add seven branches in the state.

Layoffs at the corporate headquarters are possibile, Sells said, "but we don't anticipate a huge number."

And though Katz sees no end to the worldwide trend in bank mergers, he doubts the Japanese parent company would sell off its investment in the Golden State.

"I think the Japanese banks have been, in general, very steadfast in their continued desire to be involved in California," he said.

A Banking Marriage

The merger of Sanwa Bank California and Tokai Bank of California is set to be completed Monday. Here's what the new bank will look like:

* Name: United California Bank

* Headquarters: Los Angeles

* President: Ryosuke Tamakoshi

* Owner: United Financial of Japan Holdings

* Branches: 120 (all in California)

* Employees: 3,400

* Total assets: $11.2 billion


Ranking of banks, by California market share

Bank of America: 22.73%

Wells Fargo Bank: 12.67%

Washington Mutual Bank: 12.36%

Union Bank of California: 5.21%

California Federal Bank: 4.68%

World Savings Bank: 3.19%

United California Bank*: 1.74%

Downey Savings & Loan: 1.60%

Bank of the West: 1.54%

City National Bank: 1.40%

* Combined Sanwa and Tokai market shares

Sources: Sanwa Bank California, Carpenter & Co.

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