A Yen For Lending;

 

AFTER BEING DELAYED AND stalled by half a dozen other financial institutions, California developer Ralph Rittenhouse found a local bank that was willing not only to back his small, $3-million residential development company, but even to help him promote it.

Tools and hydraulics distributor Irving Fisher's business was growing, but his bank lines were not. Despite a long-lasting relationship with a local branch loan officer, Fisher couldn't get the bank's loan committee to approve the additional financing for a planned expansion. So Fisher turned to another local bank that was willing to treat his business as a long-term growth prospect.

Over the past decade, Alan Kesten turned his small, family-owned fragrance business in Long Island City, N.Y., into an international company with $20 million in sales. Much of the credit, he says, belongs to his bankers, who recently extended $1.5 million in credit for a key expansion into an important new market.

What these three entrepreneurs have in common is that their local banks are not really local at all. In fact, they are all owned by foreigners -- foreigners who have recently discovered the potential of the American middle market.

"We see this as the best way to participate in the most dynamic part of the American economy," explains William Knowles, chairman and chief executive of National Westminster Bank USA, based in Manhattan, the American subsidiary of London's financial giant. "There's no need for another bank in New York to serve Exxon. For us, the diversity in the middle market offers the best way to build long-term earnings."

Although foreign banks have operated in the United States for generations, they had traditionally stuck to servicing the financial needs of foreign corporations doing business here. No longer. As foreign countries built up large dollar reserves and their banks began looking for growing economies, the United States offered an attractive new market. Their entry was further encouraged by bank deregulation, which made it easier for foreigners to buy a midsize American bank in the hopes of taking it into regional and national markets. The pace has been nothing short of astounding: foreign-owned banks now control an estimated 22% of all commercial loans in the United States, and have become an important source of capital not just for Wall Street but also for the small and growing companies along Main Street.

The internationalization of finance and the internationalization of markets are the hands that wash each other in this economy of the 1980s. And certainly one area in which foreign-owned banks have been able to stake a claim has been in helping smaller American companies transact business overseas.

"I don't know what it is, but there doesn't seem to be a lot of interest in trade among American banks," notes Junji Hatano, a top official with the Bank of California, a subsidiary of Japan's giant Mitsubishi Bank, which is almost relentless in its focus on the middle market. "It's a difficult business, and it tends not to be profitable in the short run. But it cements a relationship with the customer for his domestic business."

With the dollar weak, American manufacturing firms are especially looking to overseas markets for growth and profitability, and foreign-owned banks have positioned themselves well to ride the wave -- among them California First Bank, owned by Bank of Tokyo, and Walter E. Heller International Corp., the Chicago finance company now owned by The Fuji Bank. In addition to offering trade financing, these banks take pains to help client companies identify potential distributors, partners, agents, and customers overseas, leveraging their Asian connection.

It is much the same with National Westminster Bank USA, with its program targeted to European expansions. At Belmay Co., for example, CEO Alan Kesten used his bank's connections to take his fragrance-compounds manufacturing business international last year when he spotted an opportunity to set up a branch plant in Wellingborough, 70 miles north of London. Kesten's local NatWest loan officer arranged for a $1.5-million loan to finance the expansion, and the bank's branch officers in Northampton, not far from the Wellingborough facility, helped with additional local lines of credit, payroll, and other financial services.

 1 | 2 | 3 | 4 | 5  NEXT