News Column

Footprint of the Financial Giants

November 2004, HISPANIC BUSINESS Magazine

Guillermo Garcia

Richard L. Carrión, chairman of the board and CEO of Popular Inc.,  parent company of Banco Popular, is expanding the bank’s presence in the U.S. market.
Richard L. Carrión, chairman of the board and CEO of Popular Inc., parent company of Banco Popular, is expanding the bank’s presence in the U.S. market.

By outward investment appearances, the purchase by Spanish financial giant BBVA of Texas-based Laredo National Bancshares for $850 million this year was a typical bank acquisition.

Financially, the deal weighed in at about three times book value and 16 times earnings. But strategically the transaction represented much more. With the purchase, BBVA gained 35 branches in South Texas and 110,000 new customers – more than 93,000 of whom are Hispanic. And that connection to a historically under-served market, which experts project will have growing influence and affluence, was just the latest in a string of deals by global financial giants all seeking to get a foothold in the market.

Earlier this year, Banco Popular North America, the mainland operation of Puerto Rican financial giant Banco Popular, announced plans to purchase Quaker City Bank in Whittier, California. The deal gives Banco Popular 27 branches in heavily Hispanic areas, adding to the 100 branches it already has acquired across the country.

Meanwhile, after BBVA last year purchased a 40.6 percent interest in Bancomer, Mexico's largest bank, Bancomer's U.S. subsidiary this year bought Valley Bank in California. In a report from the Wharton Management School at the University of Pennsylvania, the acquisition gives Bancomer a key toehold in providing services to the U.S. Hispanic community.

And while Spanish banks are leveraging their experience in Latin America to move into the United States, U.S. banks are trying to take advantage of the growing Hispanic population to expand into Latin America. Citigroup has launched a bi-national credit card, in conjunction with its Mexican affiliate Banamex, to help remittance payments move between the U.S. Hispanic market and Mexico. And Wells Fargo has a deal with the Mexican subsidiary of HSBC (formerly Banco Vital) to create a network for U.S.-Mexico remittances.

In other efforts to tap the market, Minneapolis-based U.S. Bank last year entered a five-year deal with the U.S. Hispanic Chamber of Commerce to loan $1 billion to Hispanic companies. And also last year Chicago-based La Salle Bank furthered its initiative to win Hispanic customers by focusing on business banking in the Hispanic market. "LaSalle Bank concluded that the number of Hispanic-owned businesses would rise in conjunction with the growing population," the company said in a statement at the time. "The focus on the Hispanic middle-market businesses is a fresh approach in the Chicago market." La Salle is a subsidiary of Netherlands-based ABN AMRO Bank.

Still, with few exceptions, most of the strategies so far for penetrating the Hispanic market concentrate on the highly lucrative money transfer business. "As bankers now scramble for a piece of the $14-billion-a-year remittance market, their effort has been focused on taking market share from Western Union," says Barbara Robles, director of the Latino Financial Issues Program at the University of Texas at Austin's Center for Mexican American Studies.

But it's hard to argue against quick profits. "The banking market in the United States is very fragmented. On top of that, the Hispanic population is geographically dispersed. That means the most attractive business, to start off, is sending remittances," says Mauro Guillen, professor of management at Wharton.


Last year, Spanish banking giant BBVA acquired a 40.6 percent interest in Bancomer, Mexico's largest bank.

"Banks are hoping that remittance products will open the door to a relationship based on much more than money transfers. [But] if banks see the Hispanic market as solely the remittance market, they will fail," says Orson Aguilar, associate director at the Greenlining Institute, a California-based nonprofit that helps immigrants enter the U.S. financial system.

Mr. Aguilar notes that some banks hope to establish long-term relationships by offering free checking services to customers who open remittance accounts. Others are working to bridge cultural gaps. "It's not so much that we treat you differently, but we just work at bringing the barriers down a bit," says Jorge Solis, senior vice-president of LaSalle's commercial banking operation and head of the bank's Hispanic outreach efforts. "We treat all customers as we would any other. It's just that my customers just happen to have the same heritage that I do."

Mr. Solis says that 30 years ago that approach to banking would have been a hard sell. But in the current environment, "we see and realize that the country is becoming more Latinized every day, so my goal is not only to help businesses grow, it is also to build relationships that will emphasize customer loyalty," he explains.

Ultimately, market development will determine which banks grow in tandem with Hispanic affluence. For now, having the attention of global financial corporations provides potential benefits to Hispanics. "Competition," says Mr. Aguilar, "will only lead to good things for Hispanic consumers. Foreign banks may at first have more success since they focus on solely the Hispanic market. With time, major U.S. banks are likely to ... adopt very similar outreach and marketing strategies."

Mr. Guillen sees growth even beyond the Hispanic market. "Spain's opportunities in the United States are not restricted to the Hispanic market. ... However, at the moment they are focusing on the Hispanic population because they see it as the front door they can step through."

At La Salle, Mr. Solis also ties the Hispanic segment into growth potential for the larger U.S. market. "My bank believed in 2002, when we launched this initiative, that it made good business sense to establish a Hispanic banking group and staff it with Hispanics," he says, "because there is a huge economic opportunity for the bank, for Hispanics, [and] for the economy as a whole."


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