Region
Focus
Weekly Update
June 23, 2007 — ¿Banco del Futuro?
A
new Hispanic-focused bank is set to open in North Carolina.
Is it the wave of the future or a passing fancy?
By Doug Campbell
Last
month, North Carolina regulators approved a charter for the proposed "Nuestro
Banco," billed as the state's first
Hispanic bank. Organizers hope to open their first office in Garner,
just outside of Raleigh, by the end of July with a staff that is
entirely bilingual as well as "bicultural."
The opportunity for a Hispanic-oriented bank
in North Carolina is potentially large. The state's Hispanic
population has grown more than eightfold since 1990 and now tops
600,000. With it has come demand for financial services ranging
from money remittances to car loans. While many existing banks
have launched programs aimed at Hispanics, Nuestro Banco's top
executive believes there's a place for a bank whose entire marketing
plan is centered on that population.
"When you focus on a special niche you
can be more effective and efficient in supporting that niche," says
David Flores, Nuestro Banco's chief executive. "Our
mission is to accelerate the integration of the Hispanic community
into the broader community of North Carolina."
Banks catering to specific ethnic markets are
nothing new in the United States. Before the Great Depression,
there were more than 130 black-owned banks. Many banks targeted
to Asian consumers have sprung up in New York and California.
An estimated 20 Hispanic banks have plans to open or have recently
opened across the United States. The Washington, D.C., area has
Security One Bank, whose stated focus is to serve the "underserved
Hispanic community."
Even in North Carolina, the idea of a bank
whose very name is in Spanish is nothing new. Three years ago
Newton-based Peoples Bancorp created a subsidiary called Banco
de la Gente, which now has three locations. This activity is
not surprising, given that 50 percent of all U.S. retail banking
growth over the next eight years is expected to be generated
by serving the Hispanic population.
As of June 13, Nuestro Banco still needed approval from the Federal
Deposit Insurance Corp. and needed to raise more capital. At
present, it has a bit more than $9 million in commitments, just
short of its $12 million goal.
Flores indicates he is not very threatened
by the competition, whether existing or expected. He says that
larger banks have difficulty shifting their business models to
effectively serve Hispanics. Nuestro Banco divides its target
market into three groups: first-generation immigrants, established
Hispanic residents, and small Hispanic businesses, of which there
are an estimated 18,000 in North Carolina.
The first branch will have a Hispanic look
to it. Besides bilingual staff, all documents, receipts, and
statements will be in Spanish. A strong emphasis will be placed
on financial education. The objective — much
like any other bank tapping into the Hispanic market, large parts
of which remain unbanked — is to move Hispanics from remittance
services to checking accounts to home loans and beyond. "It's
about making our customers feel comfortable, warm, and welcome
as we engender their trust," Flores says.
But how long can minority-focused banks satisfy their customers,
not to mention their investors? After all, as Hispanics become
more integrated into the U.S. banking system, they inevitably
may seek the same services in the same way that larger groups
seek them — in various, convenient locations, at the lowest
prices.
Flores, whose more than 40-year career in financial
services has included stints with Chase Manhattan and Booz Allen
Hamilton, has reflected on this question at some length. Flores
sees Nuestro Banco as having a first-mover advantage in North
Carolina, taking advantage of an opportunity to establish itself
in a young and relatively untapped market before new competitors
spring up. Over time, he hopes Nuestro Banco can produce a string
of regional Hispanic banks in the state and beyond.
Others wonder about the long-term viability
of minority-focused banks as an operating strategy. "In the end I feel it's a
restraint on growth," says David Danielson, president of Danielson
Capital, a community bank consulting firm in Vienna, Va. "It
initially gives you your first $100 million in assets, but once
you start [trying to grow] beyond your initial customer base, it
holds you back."
Danielson notes that there is one important difference between
black-owned banks and Asian and Hispanic banks — the latter
two are more likely to be bought by larger minority-focused banking
groups. This is mostly based on the superior performance of Hispanic
and Asian banks, whose target populations in this country are growing.
Puerto Rico's Banco Popular, for example, has more than 140 offices
in six U.S. states, adding to that total with an acquisition of
a Hispanic-focused bank. In the long term, Danielson says, that
signals both greater likelihood that other similar banks will be
financed by investors, as well as perhaps better growth prospects.
