With Hispanics now constituting the largest minority in the United States – some 40 million people – their appeal to financial institutions is growing. Spanish banks are taking advantage of their strong presence in Latin America to move into the United States, even as U.S. banks are trying to take advantage of the growing Hispanic presence in their country to expand into Latin America.
For the moment, the financial institutions that serve this market are focused on sending remittances, a business that will amount to $30 billion this year, according to BID, the Inter-American Development Bank. That is more money than all the foreign direct investment in the region. The Hispanic market is extremely attractive for Spanish and American banks because most Hispanics do not even have a bank account yet; in countries like Mexico, credit accounts for only 10 percent of GDP.
Banks have recently been taking steps to win over this market. Last January, BBVA, Spain's second-largest bank, acquired a 40.6 percent interest in Bancomer, Mexico's largest bank. In May, Bancomer's U.S. subsidiary, Bancomer Transfer Services, purchased Valley Bank, a small institution in southern California. Although Valley Bank has only six offices, the acquisition will allow Bancomer to provide financial products to the U.S. Hispanic community.
Last March, Spain's largest bank, Banco Santander Central Hispano, joined forces with Bank of America, the second-largest U.S. bank, to buy 24.9 percent of Serfin, the third-largest Mexican financial group, at a cost of $1.6 billion. Shortly thereafter, the two partners underwrote a $200 million capital increase to finance the growth of their subsidiary.
Meanwhile, Citigroup, the world's largest financial group, is continuing its typically aggressive strategy. Citigroup and Banamex – its Mexican affiliate and the second-largest bank in that country – have launched a bi-national credit card for sending financial remittances. In addition, a front page article in the July 27 Wall Street Journal describes Citigroup's efforts to persuade "Mexico's long-neglected working class … to replace the rolls of pesos they fold into money belts with debit cards, credit cards and bank passbooks." It is part of Citigroup's experiment to "move down market in developing countries," including Brazil, India, China and other "fast-growing economies," the article says.
Wells Fargo, the fifth-largest bank in the U.S., has done something similar in its alliance with the Mexican subsidiary of HSBC, the former Banco Vital. HSBC's pact will create a network for transferring remittances between the U.S. and Mexico. HSBC, headquartered in the United Kingdom, is the world's second largest financial institution. Apart from acquiring Vital, HSBC has staked out a position in the U.S. by acquiring Household, which derives 15 percent of its revenues from consumer financing.
Another big player is Puerto Rican Banco Popular, the largest Hispanic bank in the U.S. The company operates in the North American market through two subsidiary companies, Banco Popular Puerto Rico and Banco Popular North America. The latter has 100 branches in the U.S. and will add 27 more next March with the acquisition of Quaker City Bank, headquartered in California. Through this acquisition, the bank has reinforced its presence in California - one of the states with the largest percentage of Hispanics - where it will now have 44 branches.
The Challenge of Going It Alone
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