PhillyInc

There are local start-up banks like More Bank in Philadelphia and Upper Darby and Asian Bank in Philly. There's Royal Asian Bank, a subsidiary of a local "American" bank Royal Bank of Pennsylvania (RBPAA.O). Foreign banks like HSBC (NYSE: HBC) and Woori Bank (NYSE: WF) have offices in the area, and Philadelphia also has a branch of the N.Y.-based Abacus Federal Savings Bank. In total, these banks had Philadelphia deposits of $303 million as of June 2006. Actually, like most numerical compilations, this one is imperfect as it counts $172 million in deposits from HSBC. These HSBC deposits certainly include a large but unknown percentage of deposits from non-Asian businesses and individuals as well as governmental entities. The Asian deposit summary also includes deposits from branches of Woori Bank America and Royal Asian Bank in Bucks and Delaware Counties, both located a stones throw from the Philadelphia line.

While Philly takes a back seat to major immigrant destinations like New York or even Newark, it perhaps makes sense that the banks have "discovered" the Philadelphia area's Asian marketplace. Officially, the U.S Census Bureau estimates there were about 72,500 Asians in the Philadelphia S.M.A. as of 2003 and the reality was probably higher even then -- Asians frequently note that some of their kinfolk may not have been included in the census count. As well, the Asian population has grown 13.9 percent between 2000 and 2003, contrasted to a decrease of 2.7 percent in the total population of Philadelphia County. Most Asians expect this growing population trend to continue as recent immigrants establish themselves, get jobs and save enough money to bring their families over. Most of these banks cater to the Korean or Chinese populations. More Bank, Royal Asian Bank and Woori have Korean roots. Asian Bank, Abacus and HSBC have Chinese roots. That said, all Asian Banks try to have multi-lingual tellers and aim to serve the entire Asian community.

However, the very reason for their existence is to make their customers feel more comfortable by dealing with their "own" in their native language. This is much like Philadelphia's Italian or Polish banks of the 1920's and 1930's. Most of these "national" banks have long since been merged out of existence (or lost their national identity) as second- and third-generation immigrants have become Americanized and are comfortable conducting their banking business in English. I suspect the same homogenization of the Asian population will occur over the next several decades, though at a slower pace.

As of the end of June last year, there were nine branches of Asian banks in Philadelphia, including two from companies based in nearby Bucks and Delaware counties. That equals one branch for every 8,000 Asians (under the outdated and probably undercounted census figure). This compares to 4,200 individuals per branch for all banks operating in Philadelphia County. This relatively low penetration probably reflects the below average income of recent immigrants and their unfamiliarity with the banking system, as well as the Asian banks' inability to penetrate the large American corporate and government deposit marketplace (except for HSBC).

Worth noting is one anomaly in Philadelphia's Asian banking scene: the absence of a Vietnamese bank. With nearly 14,000 local Vietnamese, according to the Census Bureau, there would seem to be sufficient mass to support yet another Asian bank. I wonder what's holding them up?

Moving away from the Asian scene, the Census Bureau estimates there were roughly 132,000 Latino's in Philadelphia in 2000, a number also probably lower than reality. Still, that seemingly is more than enough to support a bank or credit union. I suspect we'll see one over the next several years as these recent immigrants establish themselves and move up the economic ladder. I wonder what the the "big boys" like Wachovia (NYSE: WB) and PNC Financial Services Group Inc. (NYSE: PNC) are doing to cater to this demographic segment other than hiring Spanish-speaking tellers and mortgage and SBA loan officers, which also meets their CRA obligations. Are there missed opportunities there? Remember, minimum capital needed for a Pennsylvania banking charter is only $7 million. And a credit union can be opened for a couple hundred thou. Any takers?

- Larry Jilk is a former Pennsylvania bank executive, who does not own any stock in companies mentioned in the article. He does own stock in other commercial banks headquartered in Pennsylvania and once ran the bank holding company that employed executies who later become CEOs of Royal Asian Bank and More Bank.

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