BBCN Bancorp in Los Angeles, the nation's largest Korean-American bank, is looking to diversify its balance sheet and revenue stream as it slowly approaches a key regulatory threshold.
The $7.3 billion-asset company has launched several consumer products in recent months, including residential mortgages, wealth management services and credit cards. The expansion is designed to help BBCN, which has historically focused on commercial real estate and Small Business Administration lending, evolve into a full-service bank as it closes in on $10 billion in assets.
BBCN must provide a "more comprehensive" set of services to stay competitive, Kevin Kim, the company's president and chief executive, said.
The company's broadened product line comes as several other Korean-American banks have looked for growth by stepping outside their core clientele.
Wilshire Bancorp in Los Angeles recently bought the mortgage operations of Manhattan Bancorp in an effort to expand its presence in "non-ethnic markets." Hanmi Financial, also in Los Angeles, has taken steps to reach additional demographic groups.
While BBCN has attracted non-Korean clients, Kim said the new products will target its core customer base. "We know their business, we know their financials," he said.
The product rollout is part of a broader effort by BBCN to diversify revenue as it prepares to reach — and eventually surpass — $10 billion in assets, when banks face mandatory stress testing, caps on interchange fees and added regulatory scrutiny.
Most of BBCN's business comes from commercial clients; roughly 80% of the company's loan book involved commercial real estate at March 31.
"Our goal is to grow in excess of $10 billion," Kim said. "It is inevitable that we will have to offer more products and services."
BBCN's recent rollouts also illustrate the company's dominance within its niche-focused market, industry experts said.
"They think that because they're the largest Korean-American bank, they shouldn't have just a traditional Korean-American bank model," said Julianna Balicka, an analyst at Keefe, Bruyette & Woods. "They want to participate on the retail side, not just the commercial side."
It will likely take about a year for the new products to gain traction and boost profit. The wealth management and credit card units aren't expected to contribute to profits until mid-2016, Aaron James Deer, an analyst at Sandler O'Neill, wrote in a recent note to clients.
BBCN's newly formed mortgage division, which began making loans last month, should book roughly $100 million in residential loans by mid-2016, Kim said. The company is in the process of recruiting loan officers.
"We have recruited staff from the mainstream banking area, and for the [mortgage loan originators], we expect to recruit people from our competitors," Kim said.
For now, all three products are expected to attract new customers. The wealth management unit, in particular, is expected to bring in a new class of "high-net-worth individuals," Kim said.
"Korean- and Asian-American immigrants have matured during the last 20-30 years, and I think it's about time to offer these services," Kim added.
BBCN is also making plans to open a retail office in South Korea by early next year, Kim said.
The Seoul location, intended to help BBCN establish ties to Korean companies, is projected to save the company money on foreign-exchange services.
"It will expose BBCN to Korean businesses, which will eventually expand to the American market," Kim said. "We will have an opportunity to communicate with them before they come to the U.S. for business."