Magazine article American Banker

Los Angeles Losing Ground in Bid to Be California's Financial Hub

Magazine article American Banker

Los Angeles Losing Ground in Bid to Be California's Financial Hub

Article excerpt

Los Angeles Losing Ground in Bid To Be California's Financial Hub

Los Angeles, long the economic epicenter of California, is fast losing ground to San Francisco as the state's financial hub.

By next year, the City of Angels may no longer be home base to any world-class banking companies. Security Pacific Corp., its biggest, will be gobbled up by San Francisco's BankAmerica Corp. And Wells Fargo & Co., also based in San Francisco, has designs on First Interstate Bancorp, the second-largest banking company in Los Angeles.

If such a deal is pulled off, the largest commercial banking company in Los Angeles would be City National Corp., whose $4.7 billion in assets makes it the same size as the biggest bank in Boise, Idaho.

By other yardsticks, San Francisco is also on top. It boasts a Federal Reserve District Bank, while Los Angeles rates only a district office.

Capitalizing on Securities

On the securities front, San Francisco has already cemented its dominant role in California.

Montgomery Securities, housed in the city's historic financial district, is the premier investment house in the state. Charles Schwab & Co., the nation's biggest discount brokerage firm, is also based in the City by the Bay.

"We hate to gloat but, of course, we are going to capitalize" on our bolstered status, said James Ho, who runs the Office of Economic Development in San Francisco.

Although San Francisco traditionally was viewed as the undisputed financial center of the West Coast, its status came into question during the 1980s. Powerhouse BankAmerica was on the ropes and First Interstate was trying to take it over. Michael R. Milken, Drexel Burnham Lambert Inc.'s convicted junk-bond king, changed the country's financial landscape from his office in Beverly Hills. Jefferies Group Inc., a Los Angeles securities firm specializing in off-market trading, also was an influential Wall Street force.

A Powerhouse

Los Angeles, of course, remains an economic powerhouse.

Twelve of the state's 20 largest nonbanking public companies are based in Southern California, compared with eight in the Bay Area. About 6.5 million people are employed in Southern California, more than twice the number of workers in Northern California.

Southern California's $130.3 billion in commercial bank deposits is nearly double the $68.7 billion held in the nine counties of the Bay Area, according to the Federal Deposit Insurance Corp. Bankers generally agree that loan portfolios are similarly skewed to Southern California.

S&Ls Provide Nourishment

Finally, Los Angeles is home to many of the nation's biggest thrifts, which still have a major slice of the consumer banking market.

"Bank headquarters may have shifted, but the economic power is still in Southern California," insisted Jack Kyser, an economist with the Los Angeles Economic Development Council.

Still, officials in Los Angeles concede, the dwindling presence of major financial institutions is undermining the city's status as a seat of financial power.

"There will be a potent local impact," said Councilman Michael Woo. …

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