A comparison of the profitability of 40 banks headquartered in Los Angeles County revealed that Korean banks rank in the mid to lower range.

Amid the Federal Reserve's high-interest-rate policy and economic uncertainty, most LA County banks saw their profitability decline in the second quarter of this year compared to the previous quarter and the same period last year. Among these, Korean banks are lagging behind Chinese and mainstream competitor banks, suggesting the need for improvement.

According to the LA Business Journal, which analyzed the second-quarter financial results (as of June 30, 2024) submitted to the Federal Deposit Insurance Corporation (FDIC), BNY Mellon Trust took the top spot with a remarkable 19.2% return on assets (ROA). First Credit Bank followed with 5.9%, and First General Bank ranked third with 3.2%.

Among the five Korean banks headquartered in LA County, four were ranked between 10th and 30th place, placing them in the mid to lower range. CBB Bank ranked highest among Korean banks, placing 8th with an ROA of 1.4%, making it the only Korean bank in the top 10. Open Bank followed in 18th place with 1.0%, PCB Bank in 22nd with 0.9%, Hanmi Bank in 23rd with 0.9%, and Bank of Hope ranked 29th with 0.7%.

Although Korean banks achieved external growth in terms of assets, loans, and deposits through active lending and deposit acquisition during the COVID-19 pandemic, and continued to generate profits in the second quarter of this year, their profitability lagged behind that of competitor banks.

Return on assets (ROA) is a financial metric that indicates how efficiently a company is using its assets to generate profit. The higher the ROA, the better the profitability. For example, an ROA of 1.0% means that a company earns $1 for every $100 in assets. Typically, an ROA above 1% is considered good.

In contrast, Chinese-owned banks continued to dominate the upper rankings among LA County banks in the second quarter. Among Chinese banks, First General Bank ranked third with a 3.2% ROA, Preferred Bank ranked fourth with 2.0%, East West Bank, the largest Chinese bank, ranked sixth with 1.6%, American Plus Bank ranked seventh with 1.5%, and First Commercial Bank ranked ninth with 1.3%. Five Chinese banks made it into the top 10, the highest representation by any group.

Other Chinese banks in the top 30 included New Omni Bank (1.3%), EverTrust Bank (1.3%), Cathay Bank (1.2%), American Continental Bank (1.2%), Mega Bank (0.9%), Royal Business Bank (0.9%), CTBC Bank (0.8%), and GBC International Bank (0.7%).

In the ranking based on return on equity (ROE), Open Bank led Korean banks by ranking 8th with 11.6%. CBB Bank followed at 13th with 9.3%, Hanmi Bank at 15th with 8.4%, PCB Bank at 19th with 7.6%, and Bank of Hope at 26th with 5.4%.

BNY Mellon Trust ranked first with an ROE of 24.1%, followed by Preferred Bank with 18.9%, East West Bank with 17.2%, First Credit Bank with 14.7%, and Mission Valley Bank with 14.1%. Chinese banks also outperformed Korean banks in ROE. Cathay Bank, for instance, ranked 11th with 9.9%.

Meanwhile, as of the second quarter, the number of branches of the 40 banks headquartered in LA County had drastically decreased to 315, less than half of the 695 branches in the same period last year, due to consolidations and closures.

In addition, the total net income of the 40 banks in LA County for the second quarter stood at $1.559 billion, a significant 145.1% increase from $636 million in the same period last year. However, total assets decreased by 5.1% to $314 billion, compared to $331 billion a year ago. Total deposits also slightly declined by 2.3% to $250 billion, compared to $256 billion a year ago.

<Hwandong Cho>