Banco Bilbao Vizcaya Argentaria is counting on its name recognition in Mexico to woo unbanked Hispanic immigrants in southern California.
The Spanish banking giant, which does business in Mexico as BBVA Bancomer, has rebranded a small Moreno Valley, Calif., bank it bought last year under the Bancomer USA name and in recent months has blanketed the region with more than two dozen new Bancomer USA branches.
In Texas, BBVA mainly targets Hispanics who have bank accounts and might own homes, cars, and businesses; in California it focuses on unbanked Hispanic immigrants it hopes to turn into customers by offering check-cashing services first. Indeed, 17 of its new branches are converted offices that came from Bancomer Transfer Services, the company's remittances affiliate.
Bancomer USA has also opened 10 branches this year, to give it a total of 33. (Most are in the Los Angeles area, but the bank has a few in San Diego and the San Francisco Bay area.)
The branch expansion has been expensive, and has yet to translate into asset growth - Bancomer USA has assets of $107 million, about what Valley Bank had when BBVA acquired it.
But in an interview this week, Bancomer USA's new president and chief executive, Manuel Orozco, said he is confident the investment will pay off.
"There are a huge number of Hispanic immigrants in California, and we are hoping to reach them by leveraging the Bancomer name," he said. BBVA's Mexico banking subsidiary has about a 35% market share in that country. Mr. Orozco used to be president of its Northwest division.
Bancomer USA plans to enroll immigrants in checking and savings accounts once they have started a relationship with the bank through check cashing, Mr. Orozco said. Later this year it may begin marketing credit cards as well as mortgages and other consumer loans. (California customers can obtain these now through its Texas affiliate, but Bancomer USA is not actively marketing them.)
The handful of banking companies with similar strategies for Hispanic immigrants or the unbanked include KeyCorp in Cleveland, UnionBanCal Corp. in San Francisco (which is mostly owned by Mitsubishi Tokyo Financial Group Inc.), and El Banco de Nuestra Comunidad in Roswell, Ga.
These banks believe that by leading with check cashing, they can crack a market that banks historically have not tapped.
Union Bank offers checking accounts and loans at Nix Check Cashing stores throughout California, and also offers check cashing at 15 of its branches under its Cash and Save program. According to Ignacio Valenzuela, Union Bank's promotions manager for the program, about 30% to 40% of its check-cashing customers subsequently open checking or savings accounts.
"But it's a moving target - some of the customers may not be ready for an account after all," Mr. Valenzuela said. They will either cash most of their checks and maintain a nominal balance in their accounts, or close their accounts altogether and resume cashing their entire payroll checks, he said.
Ann Baddour, a senior policy analyst with Appleseed Texas, a legal services organization, agreed that Hispanic immigrants often have a hard time with maintaining accounts. Some banks have told her that such customers often call every day to check whether their money is still in their account.
"But it's all about developing relationships, and the banks that have been able to do that have also been able to build a steady business and a steady income," Ms. Baddour said.
She said that banks can ease these customers' anxieties by making paycheck funds available faster, and that their chances of keeping them as customers improve if they offer them financial literacy programs and the like in concert with nonprofit groups.
Bancomer USA is starting partnerships with a number of nonprofits to help market its new services, Mr. Orozco said. It will also advertise in local Spanish-language newspapers and radio stations within the next several months, but it is relying mainly on word of mouth.
Bancomer USA may have a ways to go before it makes money again (Valley Bank was profitable as a traditional commercial bank). In the first half it lost $4.5 million as it spent $12.9 million opening or renovating branches and hiring dozens of employees.
The $454 billion-asset BBVA can afford to be patient - but not for too long, Mr. Orozco said. By the end of 2007 it will reassess the strategy to determine whether to widen its marketing to all Hispanics or even to all Californians, he said.
BBVA is also beefing up in Texas. Last year it bought Laredo National Bancshares Inc., and in June it announced deals for the $6.8 billion-asset Texas Regional Bancshares Inc. in McAllen and the $1.6 billion-asset State National Bancshares Inc. in Fort Worth.
BBVA spokeswoman Julissa Bonfante said the Madrid company plans to merge the two banks into the $4.2 billion-asset Laredo National Bank by the end of January and that it is considering renaming Laredo after that.
