When Hanmi Bank announced last week that it had ended its tentative agreement to sell a majority stake to a South Korean financial conglomerate, the move threw its future – and that of the local Korean-American banking industry – into uncertain territory.
Analysts say the subsidiary of Koreatown’s Hanmi Financial Corp. will likely need to raise additional capital in the near future to be able to resolve lingering problems in its loan portfolio.
“They’re not in urgent need of capital, but their capital cushion is not very large either,” said Joseph Gladue, an analyst with West L.A. investment bank B. Riley & Co. “It would probably be a good course for them to add more.”
Hanmi had a total risk-based capital ratio of 13 percent at the end of the first quarter, above the 10 percent level required by regulators to be considered “well-capitalized.” Still, problem loans make up as much as 7 percent of its total loan portfolio.
Hanmi had been set to complete a $240 million stock sale to Woori Finance Holdings Co. Ltd., but had failed to receive regulatory approval since it was first announced in May 2010. The transaction required approval from U.S. and South Korean regulators.
Hanmi, which had been required to boost its capital levels, raised more than $120 million after the announcement, which brought it back into “well-capitalized” territory.
After the dissolution of the securities purchase agreement with Woori, the two companies agreed to a “business alliance” through which they will cooperate on business matters, including expanding trade finance activities.
“The business alliance between Hanmi and Woori, which is one of Korea’s largest financial institutions, should benefit both parties in our mutual efforts to expand our ongoing business relationship,” said Hanmi Chief Executive Jay S. Yoo in a statement.
Executives did not respond to requests for additional comment.
The other large Korean-American banks are in a state of flux, but Gladue said they could be interested in merging with Hanmi once things settle down. Koreatown’s Nara Bancorp Inc. and Center Financial Corp. are in the process of merging, which will create the nation’s largest Korean-American bank, while Wilshire Bancorp Inc. is contending with unexpected challenges in its loan portfolio.
“If (Hanmi is) still having capital issues a year from now … I would suspect either one of the two remaining main Korean-American banks would be interested in looking at it,” he said.
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