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Banking To U.S. Hispanics

Demographic projections have stateside banks scurrying to increase Hispanic market share


January 20, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

The Census Bureau projects that Hispanic population on the U.S. mainland will grow to 103 million by 2050, more than double the present population of 40 million Hispanics. On the contrary, in just half a century, the population of European Americans is expected to decrease by 19%. That might explain why expansion strategies for stateside banks are tightly focused on reaching Hispanics. According to market researcher Simmons Inc., there is an even more attractive factor defining the future of the banking sector around the demographic issue. The researcher estimates 56% of the nation’s Hispanics have never had any kind of bank account. Hispanics’ wealth and population rising three times faster than the U.S. average translates into a whole new universe of business opportunities for the industry. According to research group, that new universe is worth $200 billion in new business over the next decade.

This new business isn’t concentrated solely on individuals; the Hispanic-owned firms in the U.S. also are expected to grow 55% to 3.2 million by the year 2010. Total revenue for Hispanic-owned firms will increase by 70% to more than $465 billion in the same period, according to estimates by HispanTelligence.

As early as 2009, Selig Center for Economic Growth at the University of Georgia projects the purchasing power of U.S. Hispanics will reach the trillion-dollar mark because in 2003 purchasing power was already $653 billion larger than Mexico’s Gross Domestic Product. This aggregate income will be spent, saved, and invested, all of which will spur demand for checking accounts, consumer credit, mortgages, and investment services.

Many industry analysts believe more than half of all U.S. retail banking growth will originate from the growing Hispanic market. TowerGroup, a research and advisory firm that focuses on the global financial services industry, estimates up to 70% of the growth for U.S. financial services between 2003 and 2008 could come from the Hispanic market alone.

All this is good news for the banking industry as a whole, but it is great news for Puerto Rico banks because they will maintain the home advantage of familiarity with Hispanic customers.

Popular Inc., Banco Popular’s holding company, has established the largest Hispanic-owned financial services franchise providing complete financial solutions to all the communities it serves. Popular Inc.’s finance subsidiary in the U.S., Banco Popular North America (BPNA), operates 128 full-service branches in six states, including nine branches in Central Florida and one in South Florida. BPNA reported over $9.9 billion in assets as of Sept. 30, 2004. In addition, Popular operates 130 financial services stores under the name of Popular Cash Express. Needless to say, the corporation’s expansion plan is focused on mainland U.S. expansion in areas with large Hispanic populations. In early January, the purchase of the eight-branch bank Kislak National Bank in Miami added to the bank’s presence on the U.S. mainland.

With the market in Puerto Rico becoming increasingly more competitive, more local banks are jumping on board stateside expansion as well. On the U.S. mainland, R&G expects to open five more branches to fill in what the corporation refers to as holes in the Florida region. R&G now operates a total of 33 branches in the mainland U.S.

First Bancorp has great expectations for its expansion on the U.S. mainland with the anticipated approval of the Unibank purchase in Florida, which will be FirstBank’s introduction into that state’s retail sector.

Doral Financial Corp. concentrates its mainland operation in the New York City metropolitan area, which has one of the highest concentrations of Hispanics on the U.S. mainland.

Spanish bank BBVA formed BBVA USA in 2004 to facilitate its expansion plans in California and Texas where recent acquisitions hope to boost the bank’s access to local Hispanics in the regions.

However, stateside-based banks are perhaps even more anxious to tap into the Hispanic market. National City Corp., the nation’s 10th-largest bank, will double its Hispanic marketing budget. The bank has hired dozens of Spanish-speaking employees in Chicago where they expect virtually all of the city’s growth in the next 10 years to be Hispanics as well. In California, Well’s Fargo & Co. is redecorating its branches with Mexican themes, which they believe helped attract most of the 700 new Hispanic accounts they opened per day last year. At Bank of America, Spanish-language advertising brought in 1 million new checking accounts from Hispanics last year, representing 25% of new accounts opened. Many more banks will be added to this list in the near future as they discover a simple sign reading "Hablamos español" could be the key to the industry’s future success.

This Caribbean Business article appears courtesy of Casiano Communications.
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