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Puerto Rican Banks Eye Opportunities on Mainland
BY MATTHIAS RIEKER
November 12, 2002
SAN JUAN, Puerto Rico -- Bank executives here are eager to expand in the United States, particularly in the New York area, but high bank prices and a shortage of sellers are forcing some to bide their time or mull alternatives to whole-bank deals.
"There are tremendous, tre-mendous opportunities" in the United States for Puerto Rican banks, said Jorge A. Junquera, the chief financial officer of $32.8 billion-asset Popular Inc., in an interview Thursday.
Popular opened its first U.S. branch in 1961, in New York City, and provides commercial and consumer banking and payment services. It has 100 branches in the United States -- mostly in New York, Chicago, and California -- and is looking to triple that number in five years, Mr. Junquera said. It will do so by purchase where possible, he said, and by building branches.
The island commonwealth's banking companies are looking to capitalize on the rising number of Spanish speakers in the United States. The 2000 census found 32.8 million of them, 12% of the population. Sixty-six percent were of Mexican extraction; 9% were Puerto Rican.
"We try to focus somewhat on the Latino community, because we feel very comfortable dealing with them," Mr. Junquera said. This population is not only growing but also becoming wealthier, Mr. Junquera said. That fact has escaped some domestic banks, he said; Latinos "are very much underbanked."
But Hispanics are not the only target for Puerto Rican banks looking to expand in the United States.
Doral Financial Corp. is among those aiming for a wider clientele. "We are not discriminating," said chairman and chief executive officer Salomon Levis with a smile.
Doral's U.S. thrift subsidiary is based in midtown Manhattan, on a tony stretch of Park Avenue, and one of its three branches, in the Bronx, caters largely to African-Americans, Mr. Levis said. The best way to compete is by going head to head on price and service, he said.
He and Mr. Junquera were among several Puerto Rican banking executives who met with a group of investors who traveled to Puerto Rico last week on a trip organized by the New York investment banking company Keefe, Bruyette & Woods Inc.
Doral, founded in 1972 as a mortgage brokerage, it is now a banking company focused on mortgage origination and construction loans. It set up a commercial real estate lending operation in New York in 1998 and its thrift the next year.
Mr. Levis said he would like Doral to expand in New York, Texas, and California by purchasing residential loans or originating loans. The company, which has $4.3 billion of assets, might also buy a commercial bank if the opportunity presented itself, he said.
Another Puerto Rican financial company, Oriental Financial Group Inc., is looking at a number of ways to enter the U.S. market, said Jose E. Fernandez, its chairman, president, and chief executive.
Oriental -- which is based in San Juan, like all the Puerto Rican companies mentioned in this article -- could make that entry through small acquisitions in any of its businesses, Mr. Fernandez said. "We not only have our banking business, we have a mortgage business, trust business, financial planning business, and a brokerage business."
The $4.9 billion-asset company is particularly interested in Florida, Mr. Fernandez said.
One Puerto Rican company that has recently entered the U.S. banking market is R&G Financial Corp. In June it bought Crown Group Inc., a $664 million-asset Orlando thrift company, which it plans to merge with its New York mortgage company Continental Capital Corp.
Like many Puerto Rican banking companies, $6.2 billion-asset R&G was founded as a mortgage lender. Victor J. Galan, its chairman and chief executive officer, envisions the same progression in this country.
R&G has plans for new branches in the New York metro area, said Mr. Galan, who owns 43% of its stock. It is also looking to do more deals in Florida, but it may stay on the sidelines until the Crown Group integration is further along, he said.
Thomas Monaco, a Keefe Bruyette analyst who follows Puerto Rican banks, said there are opportunities for them in the United States to cater to Hispanics and others.
"Popular is among the best-run companies I've ever followed" and should be a viable competitor wherever it operates, he said. But to be a super community bank, not just a niche bank, it may have to change its image, Mr. Monaco said.
As Puerto Rican banking companies eye non-Hispanics, some U.S. banks are courting the Hispanic population.
To make it easier for Mexicans to open accounts, Wells Fargo & Co. is accepting identification issued by Mexican consulates. So is Harris Bank's "Harris Express" office in Chicago; the Hispanic-oriented office of the Bank of Montreal subsidiary, which provides check-cashing and other services.