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."
