Bankers and other financiers go into 2010 with the hope that the industry mess that started in late 2008 finally will clear up and give way to growth.
“I’m much more positive looking into 2010 than I was looking into 2009,” said Scott Connella, Orange County market president for San Francisco-based Union Bank NA, part of Japan’s Mitsubishi UFJ Financial Group Inc.
Connella said he’s starting to see business at many of Union Bank’s clients stabilize, if not improve.
But there’s still some more bloodletting predicted for the local finance industry next year.
The industry, which employs about 107,000 people, is projected to shed roughly 2% of its workforce in the first half of the year before leveling out in the second half, according to Chapman University.
And how well the county’s local banks hold up is an open question.
Some are struggling with a weakening commercial real estate market, while others are hungry to ramp up their lending again.
The banks play a key role in the economy by helping businesses grow with loans. Until banks resolve their own problems, the economy is likely to continue to struggle, according to economists.
Many banks didn’t lend much in 2009 as the weak economy hurt businesses and made them riskier borrowers. Other companies just stopped seeking loans altogether.
“A lot of people who have deferred taking loans on things are likely to do it eventually,” Connella said.
Some industry watchers predict at least one more local bank failure in 2010 after a couple failed from bad loans in 2009.
Interest rates, as always, will be a factor for lenders.
They’re expected to stay low for at least for the first part of 2010 after Federal Reserve Chairman Ben Bernanke said last week the central bank plans to keep its benchmark rate near zero for an “extended period.”
Where interest rates end up at the end of the year is open to speculation, with sustained economic recovery likely to trigger Federal Reserve rate hikes.
Venture capitalists and private equity investors—who largely sat on the sidelines in 2009—are showing signs of life with some national firms raising money and making deals.
PERSON TO WATCH: WALT SCHINDLER
Venture capitalist Walter Schindler expects a big year for his Costa Mesa-based Sail Venture Partners.
Sail has raised $150 million to invest in companies seeking to deliver cheaper and cleaner energy and water.
The firm is in the process of raising another $150 million.
Sail has invested in about a dozen companies. About 40% of its investments have gone to local companies, including Irvine-based WaterHealth International Inc., which sells water purification and disinfection systems, and Irvine’s FlexEnergy LLC, which makes portable power plants that run on landfill gas.
More of Sail’s companies are moving toward profitability, according to Schindler.
“We could have five profitable next year,” he said.
One company—Kyle, Texas-based Xtreme Power Inc., a maker of batteries designed to smooth out power gaps from wind and solar plants—could go public in 2010.
September’s $437 million public offering by Watertown, Mass.-based A123Systems Inc., a maker of lithium batteries with a recent market value of $1.9 billion, has been an encouragement, Schindler said.
—Dan Beighley
COMPANY TO WATCH: Sunwest Bank
Tustin’s Sunwest Bank goes into 2010 a lot bigger after picking the pieces of some failed banks.
Sunwest now is the third largest bank based here, up from No. 6 a year ago.
In the past few months, Sunwest has picked up more than $300 million in assets from failed banks, putting it at $700 million.
In November, Sunwest took over $134 million in assets of Pacific Coast National Bank in San Clemente, which was shut down by regulators. Sunwest also took over MetroPacific’s headquarters.
In July, Sunwest took over Flagstaff-based First State Bank and its $105 million in assets, a month after grabbing Irvine’s MetroPacific and its $80 million in assets.
It’s also unclear what problems may be lurking in loans Sunwest has taken on from the failed banks.
Sunwest Chief Executive Glenn Gray said he expects more banks to fail and could give a casual look at them.
But “at this point, having more organic growth would be better,” he said.
In 2009, Sunwest added about $150 million in deposits by brining four veteran bankers who brought clients from other banks.
—Dan Beighley
