UnionBanCal Corporation

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UnionBanCal Corporation

400 California Street
San Francisco, California 94104
Telephone: (415) 765-2969
Fax: (415) 765-2950
Web site: http://www.uboc.com

Public Company
Incorporated: 1952
Employees: 9,100 (2001 est.)
Total Assets: $35.2 billion (2001)
Stock Exchanges: New York
Ticker Symbol: UB
NAIC: 522110 Commercial Banking

San Francisco-based UnionBanCal Corporation is a commercial bank holding company that was incorporated in California in 1952. UnionBanCals primary subsidiary is the Union Bank of California, which was formed April 1, 1996, when the Union Bank of San Francisco merged with the Bank of California. This merger formed one of the 35 largest banks in the United States. The consolidation of these two banks was brought about by the merger of the Bank of Tokyo Ltd., which owns Union Bank, and Mitsubishi Bank Ltd., which owns the Bank of California.

In the years since the merger, the Union Bank of California has grown to become the third largest commercial bank in the state of California. The Bank of Tokyo-Mitsubishi, Ltd. owns 67 percent of UnionBanCal Corporation. Union Bank of California offers numerous customer services, including ATM/Debit Cards, home mortgages, supermarket branches, real estate financing, asset-based finance and leasing, import/export financing, electronic letters of credit, trust and money management, Internet banking, and other state-of-the-art financial services.

Early History of Union Bank of San Francisco

The founder of Union Bank, Kaspare Cohn, was a highly successful businessman in the wool-growing industry in the state of California. During the late 19th century and early years of the 20th century, California was still a pastoral state with huge tracts of land upon which cattle and sheep used to graze. During one period of the states history, over seven million sheep roamed the California landscape. In his capacity as a wool merchant, Kaspare Cohn worked with Basque shepherds who supplied him with the wool for his business. Since these shepherds tended their sheep far from the city of Los Angeles, they were naturally inclined to ask Cohn, with whom they had developed a close working relationship, to safeguard the proceeds of their wool sales until there came a time when the money was needed. Occasionally, when one shepherd needed an advance to help him during a financially difficult time, or another needed credit to improve or add to his flock of sheep, Cohn would provide the necessary funds.

When the California Banking Department became aware that Cohn was functioning like his own bank, namely, accepting deposits from customers and arranging loans, the state authorities gave him the choice of either formalizing his activities by creating a bank or desisting from any further financial transactions. Cohn, already a wealthy man from his various investments in land and vineyards, decided that he had all the contacts necessary to establish and organize a bank. In 1914, he founded the Kaspare Cohn Commercial & Savings Bank. Some of the more important decisions Cohn made while serving as president of the bank included the financing of the San Gabriel Light & Power Company, and another small natural gas company that ultimately became part of Pacific Lighting Corporation.

Kaspare Cohn died in 1916 and was followed by Ben Meyer as president of the bank. Just before the U.S. entry into World War I, the city of Los Angeles and the state of California were starting their long period of growth and development. Businesses, restaurants, and civic organizations were being created all over the state, and many of these enterprises were being founded by new residents. The search for capital was at an all-time high, yet risks were understandably great, and the banking community was conservative in its loan policies. A new bank like Kaspare Cohn Commercial & Savings Bank saw an opportunity to manage customer deposits by providing exceptional service. In addition, under the direction of Meyer, the bank began to garner a reputation as an astute lender. Meyer had an uncanny ability to provide loans to those entrepreneurs who not only were successful in their business endeavors but who were also able to promote the development of the city of Los Angeles.

In 1918 the name of the bank was changed to Union Bank & Trust Company. In 1922 the bank was growing at such a fast rate that it opened a new headquarters on Eighth and Hill Streets and, just five years later, the banks continued growth required an enlargement and significant improvement of these facilities. Much of the banks business during this time was based on the civic leadership and personal qualities of Ben Meyer. As president of Cedar Hospital, Meyer visited the hospital every morning, greeting both staff and patients. While attending a ballet one evening at the Hollywood Bowl, Meyer discovered that the performance was in danger of being canceled since the stagehands had not been paid their wages. Meyer went backstage, presented the stagehands with a personal check for what they were owed, and the show was performed.

During the entire decade of the 1920s, Meyer presided over Union Banks period of uninhibited growth. Deposits were increasing, the loan department was successful in its choice of entrepreneurs, and assets continued to rise at an astounding rate. Like every bank across the nation, however, Union Bank was affected by the stock market crash of 1929. Yet the bank survived the crash and the worst of the Depression. After Franklin Delano Roosevelts Bank Holiday Proclamation in 1933, Union Bank was one of the banks allowed to reopen for business. The deft management of the banks assets and business activities during this time was largely due to the talent of Ben Meyer.

Expanded Services in the 1940s, 1950s, and 1960s

The early 1940s were disruptive for the entire United States since men of all ages were involved in the military conflicts of World War II. Yet even below normal staff levels, Union Bank continued to expand its services and extend its asset base. The bank was the first bank throughout the entire western part of United States to implement a program known as bank-by-mail service. This program involved free postage both ways for customers doing banking business. Since the bank had a policy of not opening branch offices, the nearby mailbox was a highly successful substitute. Union Bank was also one of the first banks throughout the western United States to provide its customers with lock-box banking, a new development for collecting payments. During the latter part of the decade, Union Banks slogan became, The Bank of Personal Service.

Ben Meyer retired in 1950, and Herman Hahn, an executive with 20 years service in Union Bank, became president. Hahn was an energetic leader and active in many civic groups in the Los Angeles area. Within the bank, he had built a reputation for his ability to structure complex loans and had thereby brought a good deal of visibility to the loan department. Unfortunately, Hahn unexpectedly died in 1954, and the bank was forced to look for a successor. Meyer came out of retirement to temporarily assume the responsibilities of president, as the banks board of directors searched for a new candidate. In 1957 the bank appointed Harry J. Volk to serve as president. Volk brought with him extensive experience from the insurance industry, having left a job at The Prudential Insurance Company to accept the presidency at Union Bank. Two months following Volks appointment, Ben Meyer died.

Soon after Volk became president, he assembled his staff and members of the banks board of directors to discuss the changes in the banking industry and how Union Bank should respond to the challenges ahead. The overwhelming response was that the bank had to take advantage of as many growth opportunities as possible. As a result, management decided to expand its presence throughout the state of California, but rather than imitate the branch banking system of most retail banks, Union Bank decided to organize semiautonomous offices staffed with senior bank officers that would provide all the services normally available at the banks headquarters on Eighth and Hill Streets in San Francisco. The bank adopted the phrase, Regional Banking, in order to describe this comprehensive, yet highly innovative, banking system.

Over the next decade, Union Bank opened 16 regional head offices, including facilities in major areas such as Beverly Hills, Sacramento, and San Diego. Along with its development of regional offices, Union Bank acquired Occidental Bank, located in the heart of the San Fernando Valley. This was Union Banks first acquisition. While concentrating on expanding geographically, the bank also initiated new and highly creative customer service practices. The bank was the first financial institution to calculate a daily compounded interest rate on individual savings accounts, the first to introduce savings statements for customers that were computer generated, and the first to introduce original techniques for interim construction financing.

A New Concept in Banking

The year 1967 was one of the most important years in the history of Union Bank. The bank was the first major bank in the United States to form and establish a one-bank holding company. This new concept in banking completely transformed the banking industry. The holding company, Union Bancorp (subsequently changed to Unionamerica, Inc. in 1969) was formed to assume the ownership of Union Bank and to create new opportunities for expanding into diversified areas of financial services. The day after the formation of the bank holding company, Union Bank acquired one of the largest mortgage firms in the United States, Western Mortgage Corporation.

Company Perspectives:

At Union Bank, we are building on our strengths. We appreciate our customers business and work hard to maintain their loyalty. We believe that we stand out from our competitors because of our highly professional staff and superior

When the Bank Holding Company Act was passed in 1970, describing strict limitations on the activities of bank holding companies and requiring that some of these activities be divested, Unionamerica changed its name back to Union Bancorp and reorganized its operations, including the operations of all its subsidiaries. The companys new headquarters on Bunker Hill were occupied by this time, and new acquisitions of banks were made in Oakland, San Francisco, Palo Alto, and Long Beach. By 1972 the banks deposits in its Northern California regional office were greater than those of the entire bank. It was during this period that the bank entered the field of international banking and opened offices in Rio de Janeiro, Tokyo, and London.

Ownership by the Bank of Tokyo

The late 1970s and the entire decade of the 1980s were highly profitable years for the bank. Under astute management, the bank continued to improve upon its already-attractive customer services. Most important, however, the bank continued to expand throughout California. Not content with regional offices anymore, management decided to go into branch banking. By the mid-1980s, Union Bank had an extensive network of branch locations up and down the coast of California. One of the surprises within the state banking industry occurred when the Bank of Tokyo, Ltd., a Japanese-based bank holding company, purchased Union Bank in October of 1988. Although Union Bank was performing admirably, the acquisition by the Bank of Tokyo signaled that the banks board of directors was willing to use the resources of its Japanese parent to grow even larger. Under the direction of the Bank of Tokyo, Union Bank continued its expansion program, and the result was an impressive increase in the assets of the bank. By the mid-1990s, assets had grown to approximately $18 billion. In addition to its ever-increasing asset base, however, the bank built its branch network to include a total of over 200 offices in the state. Union Bank was widely regarded as one of the financial institutions with the best customer services on the West Coast.

Merger with the Bank of California in 1996

In 1995, the Bank of Tokyo and Mitsubishi Bank, Ltd., also a Japanese-based bank holding company, agreed to merge in order to create the worlds largest bank. The two financial titans established a private bank whose assets totaled approximately $820 billion. At the same time, the Bank of Tokyo and Mitsubishi Bank, Ltd., agreed to merge their two most prominent subsidiaries, Union Bank and the Bank of California, and created UnionBanCal Corporation, a holding company, and its primary subsidiary Union Bank of California. The Bank of California was less than half the size of Union Bank, with only $7 million in assets and 46 branch offices in Washington, Oregon, and California. Effective April 1, 1996, the merger between the two subsidiaries formed the fourth largest bank in the state of California, with over $25 billion in assets. The combined resources of Union Bank and the Bank of California meant improved services in such areas as commercial markets, specialized lending, trust services, private banking, treasury services, retail markets, and international banking.

Union Bank of California continued a number of the more important strategies that management at Union Bank was working on at the time of the merger. Union Bank had a long-established policy of providing support services to individual entrepreneurs and businesses from Asia and the Pacific Rim that wanted to establish themselves in the United States. At the time of the merger, Union Bank was helping over 1,200 Japanese corporations with their operations in California. Union Bank of California planned to continue assisting these business pioneers by offering such services as cash management, pension plans, investment products, wire transfers, expedited loan approvals, and general financial advice. Another policy continued at Union Bank of California was the banks commitment to community involvement. In the past, Union Bank had sponsored 5k runs for charity, funded the construction of low-income family dwellings in Los Angeles, and contributed $150,000 to the brand-new San Francisco Main Library.

The merger between Union Bank and the Bank of California has provided a wider range of financial services, including trust and investment services, retail banking, private banking, business banking, and international banking.

Key Dates:

Kaspare Cohn founds the Kaspare Cohn Commercial & Savings Bank.
The banks name is changed to Union Bank & Trust Company of Los Angeles.
The bank opens a new headquarters in San Francisco.
The banks name is shortened to Union Bank.
The bank establishes Union Bancorp, a one-bank holding company.
The bank enters international banking and opens offices in Rio de Janeiro, Tokyo, and London.
Union Bancorp is acquired by Standard Chartered PLC of London.
Union Bancorp is acquired by California First Bank (which is owned by The Bank of Tokyo California) and retains the Union Bank name.
The Mitsubishi Corporation of Japan and The Bank of Tokyo, Ltd. merge, resulting in the consolidation of The Bank of California and Union Bank into UnionBanCal Corporation and its primary subsidiary Union Bank of California, N.A.
The bank redesigns its product line and enhances its technological capabilities for customers.
Due to a rash of bad loans, the bank announces its intent to shift its emphasis from lending to a fee-oriented business and to expand business nationwide.

Changes after the Merger

In 1997, Union Bank of California was the first licensee of software called Mobile Solutions for Banking. The software, jointly developed by American National Bank & Trust Co. and KPMG Peat Marwick LLP, allowed sales staff working outside of the office access to information about all of the banks customers and prospective customers, as well as up-to-date listings of exactly which products and services the bank offered in the region they were working. Union Bank of California was not the only institution to find this new system groundbreaking, The Smithsonian Institute felt it was distinguished enough to include in the permanent collection of exponents of technological innovation, at the National Museum of American History. Other technological resources that the bank added to their offerings in the late 1990s included: CLEAR/IMAGE International Positive Pay service, a tool that gave businesses the ability to view suspicious checks online to detect fraudulent activity before a decision to pay or not pay the check was made; ImageMark proof-of-deposit (POD), which allowed the bank to deliver image statements via the Internet and perform other useful functions; and the development of an online service that permitted customers to set up and manage 401(k) plans from any device connected to the Internet. The online 401(k) service joined the many resources that the Union Bank of California had available for its customers, including the ability for bank customers to call up their accounts, check balances, and gain access to information from online financial sources.

Due to a spattering of bad loans in 2000, Union Bank of California shifted its emphasis from lending to a fee-oriented business. Two of the bad loans were to Pacific Gas and Electric Corporation and Southern California Edison Company; both of these companies finances were affected by the 2001 California energy crisis. Norimichi Kanari, appointed to president and CEO of the bank in 2001, announced plans to adhere to the strategy adopted in late 2000 by then president and CEO Takahiro Moriguchi to lessen the banks dependency on lending. Additionally, Kanari set the bank on a path toward expanding the Union Bank of Californias private banking business in the West and expanding its institutional trust and custodial business nationwide. The stock market responded positively to Kanaris shift in strategy, raising the banks stock price 112 percent between September 2000 and July 2001. This remarkable spike in stock price caused some analysts to speculate that a takeover may be in Union Bank of Californias future. Regardless of speculation, the company continues to maintain a strong position in the Californian banking industry.

Principal Subsidiaries

Armstrong/Robitaille; Union Bank of California.

Principal Competitors

AmSouth Bancorporation; BB&T Corporation; Comerica Incorporated; Compass Bancshares, Inc.; Fifth Third Bancorp; Huntington Bancshares Incorporated; National Commerce Financial Corporation; Regions Financial Corporation; SouthTrust Corporation; Zions Bancorporation.

Further Reading

Another Redo, American Banker, February 2001, p. 16.

Baljko, Jennifer L., Union Bank of California Adds Fraud Safeguard, Bank Systems & Technology, February 1998, p. 39.

Bank Offers Wireless 401 (k) Management, Nokomis, July 2001, p. 56.

Clark, Don, Union Bank to Buy Bank of California as Parents Merge, Wall Street Journal, September 29, 1995, p. A7(E).

Crockett, Barton, Bank of California, Union Bank Put Merger Savings at $90 Million, American Banker, September 29, 1995, p. 4.

, Japanese Giants California Jewels Are Seen as Takeover Target, American Banker, August 28, 1995, p. 4.

Icon Group International, Inc. Staff, UnionBanCal Corp.: Labor Productivity Benchmarks and International Gap Analysis, San Diego: Icon Group International, Incorporated, 2000, http://www.icon grouponline.com.

Japanese Megamerger to Create California Giant, American Banker, May 30, 1995, p. 26.

Kanari: Cleaning Up the Mess, American Banker, August 2001, p. 20.

Kraus, James, R., Japan Likely to Create the Biggest Foreign-Owned Bank in the U.S., American Banker, March 30, 1995, p. 1.

Marlin, Steven, Union Bank of California to Deploy POD System, Bank Systems & Technology, June 1998, p. 26.

Monahan, Julie, Union Bank of California Plans to Speed New Accounts Using the Local Area Net, American Banker, March 22, 1995, pp. A10-11.

OSullivan, Orla, Bringing Your Commerical Customers into Focus, ABA Banking Journal, December 1997, p. 52.

Pesek, Jr., William, Union Bank Rings Up Retail Profits with Phone-Based System, American Banker, May 24, 1993, p. A8.

Union Bank of California, Manhasset, September 24, 2001, p. 41.

Union Bank Purchase of Branches Approved, American Banker, May 29, 1992, p. 8.

Volk, Harry J., Union Bank, New York: Newcomen Society, 1974.

Thomas Derdak

update: Tammy Weisberger

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