Citicorp and Chase Manhattan Corp., two U.S. banks with long histories in Puerto Rico, have followed radically different strategies during the past few years.

Citicorp, which set up offices on the island in 1918 and has 18 branches, has pursued large wholesale, middle-market, and retail banking here.

Chase, which arrived in 1933, now restricts itself to wholesale banking, focusing on multinationals with operations in Puerto Rico, large local corporations, and real estate development. The bank sold off 11 branches in Puerto Rico in 1991, retaining only one in Hato Rey, San Juan's downtown financial district.

"We've concentrated on wholesale banking, areas like acquisition and syndicated finance, risk management products, advisory services, including project finance, M&A, global services, cash management, and custody services," said Robert Davila, managing director and senior country officer for Chase in Puerto Rico.

Of the two banks, Citibank has the larger presence, with some $2.7 billion in assets, roughly 10% of the Island's $31 billion in total bank assets.

Citibank ranks as the third-largest bank on the island, after Banponce Corp. and Banco Santander.

Chase's assets have averaged around $1.3 billion.

Both banks remain bullish on prospects for banking in Puerto Rico. "We plan to have a broader presence in the future," said Arthur Zeller, Citibank country corporate officer in Puerto Rico. "Puerto Rico is a highly competitive market, but with the right strategy and right position, you can run a fairly good business."

However, both Mr. Zeller and Mr. Davila expressed concern about the fate of tax breaks under Section 936 of the Internal Revenue Service code. The tax breaks, which encourage mainland manufacturers to locate plants in Puerto Rico, have been a major stimulus to economic development on the island. But proposals in both houses of Congress would eliminate them. Bankers noted that eliminating the provision could affect some $7 billion in tax-exempt deposits and push up the cost of funding.

"Larger banks will be less affected than smaller ones," said Mr. Zeller. "What I'm really concerned about, though, is the long-term effect (the elimination of the tax breaks) could have on the health of the island."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.