One of the reasons why UCB failed was that the bank used to keep and hire a lot of weak employees in the branch division. They either belong to the old generations of savings and loan or cannot survive in other commercial banks. They can only count on promotions and promotions to grow their deposits. You could see the facts by comparing the bank's average cost of funds with the peers' and observing their promotional and marketing activities. On the liability side, they are lack of commercial knowledge and skills, so all they can generate are either home loans or apartment loans. What would that mean between 2003 and 2008(5 year period)? The bank's interest margin would be the worst among the peers with a higher cost of funds and lower yields. In order to continue growing and making enough profits, the bank had to do a lot of extra productions in other areas to make up the deficiency of the retail division. This meant that the bank was forced to grow their construction and commercial portfolio more aggressively during that period. Eventually, when the economy turned to the other way, it was too late to realize the drawback of carrying the burden.
East West was well-known to be more cruel in terms of getting rid of their incapable officers and managers. This willingness in fact put the bank in a better position in the competition.
Now, UCB is a part of East West. What should East West do to turn around the situation? What I heard so far was that a lot of good commercial employees already left UCB. Unfortunately, East West had no choice but to keep a lot of UCB's senior management to run the existing branches. These senior managers were either the veterans of United Savings Bank or those who were lack of business senses and could not adapt to the competitive markets.
Hopefully, East West will be able to observe and fully evaluate the remaining managers and officers of UCB. Otherwise, the situation will.............!!!!!
How can this bank be sucessful if it pays its own executives peanut? Both UCBH and EWBC were already fishing from the bottom of the barrel when it comes to talants. All the high caliber people are at BofA, Wells and Union Bank.
There are 137 UCB offices. Assume there are 137 of these fat cats averaging $250K/yr. That will cost EWBC $34 mil/year.
The total loan amount from UCB is about 7400 millions, about 1200 millions were bad loans and covered by FDIC.
Even you fired all 137 fat cats and save the $34 millions/year, the bad loans will still be bad. Bad economy will make bad loan worse and good loans turn bad. Good economy will make EWBC take off. I will bet on economy.....Just a thought.
We are talking about two different issues here. Why are you so sure that China Minsheng will invest in a bank that indirectly caused them to lose all the investment? China Minsheng only needs a chance to step into the U.S. market or another business partner that has good network in the states. There are many other choices.
On other hand, we are talking about East West still keeps a lot of UCB's fat especially those incompetent so called senior management employees. They will take down East West rapidly.
Totally agree withLexy. Management at EWB will bring down the bank. The tough economy is what it is. Banks have gone through that over and over. But the incompetent people there will bring the company down.
They should go, no questions. But existing loan performance from UCB (bad or good ones) have very little to do with these but more with the economy. With or without these fat cats, bad economy will bring down EWBC.