Orange County’s banks, venture capital firms, investment banks and stock brokerages will keep a steady eye on interest rates in 2005.
Deposit growth at banks operating in OC is expected to slow to 15% in 2005, down from this year’s torrid 23% pace, according to Ed Carpenter, founder and chief executive of Irvine bank advisory firm Carpenter & Co.
Growth here beats statewide gains of 20% this year and tops the 12% projected for next year.
Rising interest rates loom large. They are a mixed bag for bankers.
As interest rates increase, banks could see a short-term benefit from net interest margins, the difference between what they pay out in interest on savings and other accounts and what they make off loans.
When rates increase as they have in 2004, banks are slower to adjust what they pay savers versus what they charge borrowers. But, in the longer term, higher rates can stifle economic growth, which lowers demand for corporate loans.
Real estate is expected again to be a growth driver for local banks, though higher rates could temper the gains of the past few years.
“Most OC banks will continue to have the majority of their total loan growth in real estate, even though the rate of growth will be far less than in the past two years,” Carpenter said in an earlier interview. “The increasing growth rates will be in business loans, SBA loans and accounts receivable financing. Consumer credit growth in OC will remain at about the same levels as the past two years.”
Ken Cosgrove, chief executive of Anaheim’s Premier Commercial Bank, said business lending would fuel the bank’s loan growth during the next year.
“More specifically, commercial and industrial loans, commercial real estate, hospitality financing, SBA lending and construction will be our emphasis,” he said.
And, if past is prelude, there could be a few banks opening in 2005. Two,MetroPacific Bank in Irvine and First Vietnamese American Bank in Westminster,expect to debut next year.
Wall Street enters 2005 on a mixed note.
After a booming 2003, stocks posted moderate results this year. Many investors were preoccupied with the war in Iraq, presidential election and interest rate hikes. Overall, the Dow Jones Industrial Average is up 2% this year, with the S & P; 500 index rising 8%.
Smith Barney predicts the Dow will end 2005 at 11,700, up 10% from last week. The S & P; is seen rising 8% to 1,300.
The targets are based on Smith Barney’s view “that the Federal Reserve will complete the interest rate increases by the end of 2005, oil prices will drop from current levels … the market’s expectations of earnings growth will be 8.7%, and GDP growth will be in the range of 4% in 2005,” said Michael Johnston, managing director of investments at Smith Barney’s Pacific Group in Irvine.
Venture capital investing will look to rebound from a moribund 2004.
Thirty-five OC startups attracted just $217 million of venture funds through the first three quarters of the year. That puts the county on track to post the lowest funding this year since 1996, with the fewest startups raising money since 1995.
Meanwhile, OC still is waiting for one high-profile initial public offering,Jazz Semiconductor Inc., the Newport Beach chipmaker that used to be part of Conexant Systems Inc.
PERSON to watch: Hieu Nguyen
First Vietnamese American Bank’s Hieu Nguyen is an entrepreneur to watch.
The chief executive and founder of Little Saigon’s First Vietnamese is preparing to launch the bank. He’s started selling 1.1 million shares of stock in an $11 million offering to fund the bank’s startup costs.
Nguyen is a former Beverly Hill-based vice president of Israel Discount Bank Ltd.
First Vietnamese will join other ethnic banks in Orange County, though it is set to be the first to solely focus on the large Vietnamese community here. And it’s a sign the Vietnamese community in OC is coming of age, seeking financial services to help grow business.
The Westminster-based bank could grow fast. Another ethnic-focused bank, Uniti Bank Corp. of Buena Park, has doubled deposits in a year to $103 million at recent check. Uniti is geared toward Korean-Americans.
Little Saigon is home to more than 200,000 Vietnamese and their offspring and covers parts of Fountain Valley, Garden Grove, Westminster and Santa Ana. The area is home to the largest number of ethnic Vietnamese outside Vietnam.
Language barriers keep the older generation of Vietnamese away from banks, said Ed Carpenter, founder and chief executive of Irvine bank advisory firm Carpenter & Co. Plus, there is a general mistrust of banks among many immigrants, he said.
Nguyen’s held information classes for the community.
The program, “Money Smart,” finished its first cycle of 10 classes last summer. Sponsored by the Federal Deposit Insurance Corp., the program was free, with classes held at the Vietnamese Community of Southern California’s facilities in Westminster.
Nguyen earned general approval to operate from the Federal Deposit Insurance Corp. in fall.
,Andrew Simons
Bank to watch: Sunwest Bank
Interim chief executive Irving Beimler is charged with helping Tustin’s Sunwest Bank find the accelerator.
Beimler replaced Marshall Laitsch as chief executive of Tustin’s Sunwest bank in August,only a year after Laitsch came on board. The bank is looking for a permanent chief.
Bank assets at the end of the third quarter were down 4.7% to $296 million, versus a year earlier. Deposits were up 2.9% to $255 million in the period.
Orange County’s oldest homegrown business bank, Sunwest has long had a strong real estate business,it was lending to businesses that needed a pinch. Laitsch had said in past interviews that a key goal of his was to boost lending to businesses.
Net income rose a healthy 16% to $1 million in the third quarter, though it’s off 29% through the nine-month period ending Sept. 30.
Washington, D.C., financier Eric Hovde owns most of the bank. Hovde, who owns investment bank Hovde Financial LLC in Washington, long has said he has no interest in selling the bank.
,Andrew Simons
