Considering that he runs the 22d-largest U.S. banking company, Richard L. Carrion of Popular Inc. has a remarkably low profile in the industry.
The Puerto Rico company has never held an earnings conference call or an investor day, and its quarterly earnings reports are bare-bones.
Bain Slack, an analyst with Keefe, Bruyette & Woods Inc. who has taken investors to meet with Popular's senior managers several times, said Mr. Carrion rarely shows. When he does, Mr. Slack said, the chief executive keeps his comments general. "He is a long-term thinker. I get the feeling he is not concerned about the day-to-day stock price," for example, Mr. Slack said.
Thomas Monaco, an analyst at Moors & Cabot Inc. who has covered Popular for four years, said he has never met the CEO.
Mr. Carrion, whose family has led Popular for three generations, makes no secret of his reluctance to discuss short-term numbers with Wall Street. But during a recent interview in his 18th-century home in the center of Old San Juan, he said banking, and in particular serving low-income customers, is his passion.
Popular "is my purpose in life," he said. "We are in tough neighborhoods, and we are there by choice."
While only 45% of Popular's mainland customers are Latino, 80% of its branches there are in low- and moderate-income neighborhoods.
"We see ourselves as having a commitment to that segment of the population," Mr. Carrion said in an interview last year. "That's what our bank was founded on 111 years ago, and it's built into our DNA."
Popular was established in 1893, five years before Puerto Rico became a U.S. commonwealth following the Spanish-American War, as a savings and loan company for "all social groups, especially the poor," according to its first article of incorporation.
Mr. Carrion said Popular long ago concluded that Hispanic customers want the same thing all other customers want: good service.
"We have a community bank strategy - not a Hispanic bank strategy," he said. "We went through this thing that many banks are going through now, thinking that this Hispanic market is particularly unique.
"Well, it's not."
Popular Inc. is the holding company for both Banco Popular, the $23.1 billion-asset bank that dominates Puerto Rico, and Popular North America Inc., a Chicago unit that had $19.3 billion of assets at yearend.
Popular expanded its reach to the mainland in 1961 and now operates 128 branches in five markets: New York, Los Angeles, Chicago, Houston, and Miami. In addition to the retail bank, Popular North America operates Popular Cash Express Inc., a 114-branch check-cashing and money transfer subsidiary, and Equity One Inc., a subprime mortgage origination and servicing company.
The parent company is approaching a tipping point, as Mr. Carrion moves to double Popular North America over the next three to five years; the goal is to generate half of Popular's revenue on the mainland, up from 36.6% today.
Last week Popular became the official bank of the New York Mets. Mr. Carrion did not say how much it would pay for the five-year deal, but the arrangement is "a big step," he said. "We are in the big league now."
Roberto R. Herencia, Banco Popular North America's president, said momentum is building; last year its loan book grew 14% (excluding acquisitions), deposits grew 19%, and fee income grew 18%. Mr. Herencia said he is most focused on increasing checking accounts and small-business loans.
"We do about $200 million a year [of small-business loans]. We believe that we can be somewhere between $800 million to $1 billion by the end of 2008," he said. Popular North America will also push into middle-market lending, particularly in Florida.
In 2002, Popular North America began a three-year program to shift its systems to one platform, centralize back-office operations in Chicago, and cut 20% of its staff, or about 300 employees. The efforts have improved its efficiency ratio to 60%, from 88%. "Our goal this year is to bring it to 55%," around the same level as Banco Popular Puerto Rico, Mr. Herencia said. From here on gains will rely on higher revenue rather than lower costs, he said.
Though its growth has been rapid in recent years, some analysts said Popular needs to buy more companies, and bigger ones, if it truly wants to become a more mainland-oriented company. The company disagrees with that view.
An active buyer in the 1990s - absorbing 11 mainland banking companies since 1993 - Popular took a pause in 2000 to improve its regulatory compliance after being hit with an enforcement action by the Federal Reserve Board.
Popular returned to the role of buyer in September, when it bought Quaker City Bancorp Inc. of Whittier, Calif., for $369.6 million. In January it bought Kislak National Bank of Miami for $158 million.
These days Popular is attracting more attention on Wall Street; seven firms now cover it, including UBS Securities LLC and Merrill Lynch & Co. Inc.
Omotayo Okusanya 2d, a UBS Securities analyst who initiated coverage of Popular in January, with a "neutral" rating, said "continued 10% [earnings per share] growth will depend on how aggressively Popular builds" the mainland business.
"We believe Popular will need to do at least one, possibly two, larger deals to maintain its historical EPS growth," Mr. Okusanya wrote in his report. "Larger accretive deals will be needed."
But Popular executives have repeatedly said its deals will probably remain small.
"We are finicky in that respect," Mr. Carrion said. "We'll continue to look, but I suspect we will be even more finicky in view of where prices are right now. There is a limit to the depth of our pockets."
Mark W. Kehoe, a Merrill analyst, initiated coverage of Popular with a "neutral" rating March 17. In his report, he wrote that the mainland market "presents significant opportunities" for Popular, but that "better execution will be required."
"A track record of low profitability, an inability to organically grow its U.S. market share, and the challenges of managing an increasingly diverse organization should negatively impact earnings," he wrote.
The Cash Express unit has made money just one year, 1998, when it was founded and Popular acquired two other check-cashing operations in Florida and Illinois.
Though it is unprofitable, Mr. Herencia said, "it is not generating huge losses, either."
Mr. Carrion said Cash Express has a role to play in Popular's mission to serve the undeserved. The business "is strategically very important to us," and half of Cash Express customers have a bank account with Popular, he said.
The parent company also has built a sizable subprime mortgage business, and it has expanded into unsecured consumer finance, wholesale mortgage lending, mortgage warehouse lending, and mortgage servicing.
Last year it consolidated its 15-year-old retail mortgage unit, Equity One, and the other mortgage and consumer finance businesses into Popular Financial Holdings Inc., a $9 billion-asset subsidiary headquartered in Marlton, N.J. The business accounted for 12% of Popular's 2004 profits, or $58.8 million.
Both Mr. Slack and Mr. Monaco praised Popular's management as among the industry's best.
"They rotate people around … and what you have is a team of managers who know the company really well," Mr. Slack said.
Besides Mr. Carrion and Mr. Herencia, Popular's senior management includes David H. Chafey Jr. and Jorge A. Junquera. The two executives recently traded jobs. Mr. Chafey is now the president of Banco Popular Puerto Rico, while Mr. Junquera is the chief financial officer.
Several fund managers interviewed for this story said they are considering buying Popular shares. At least one regretted he has not done so yet. The stock was the best performer among the top 50 banks last year, in part because of the Carrion family's purchases last summer.
"We clearly missed the boat on that one," said David W. Allaire, a portfolio manager with Mystic Asset Management Inc. of Warwick, R.I.
Mr. Carrion has put his, and his family's, money on the line.
The 52-year-old owns 673,000 Popular shares and controls almost 10 million, mostly through Junior Investment Corp., a Carrion family investment vehicle. Junior Investment is the second-largest holder of Popular's common stock, with 9.3 million shares, after State Farm Group, which own 17.4 million, or a 6.6% stake.
Asked whether he could imagine selling Popular, Mr. Carrion does not hesitate before vowing, "Never." Of course, a buyer offering a "crazy" price would have to be heard out, he said.
While he may not be particularly well known within the industry, the soft-spoken CEO does have a higher profile in the broader business world, as well as internationally. He sits on the boards of Verizon Communications Inc., the Madison, N.J., pharmaceutical company Wyeth, and Telecomunicaciones de Puerto Rico Inc.
He also is a member of the International Olympic Committee's executive board and chairs its finance committee. He joined the IOC in 1991 after leading San Juan's application to host the 2004 Summer Olympic Games, which were eventually awarded to Athens.
In 2003, Mr. Carrion promised the IOC that he would negotiate a fee of at least $2 billion for the U.S. television rights to the 2010 and 2012 games; he later said he regretted the pledge almost as soon as he made it. Though to his own surprise, NBC was willing to pay even slightly more.
His IOC work, particularly the travel schedule, is demanding, Mr. Carrion said. But while he is contemplating giving up a board seat, he said his Olympic obligations are a matter of great pride.
As a young man, Mr. Carrion said, he gave little thought to following his father and grandfather to work at Popular.
"The next-to-last thing I'd thought I'd be doing was coming back to live in Puerto Rico" after undergraduate and graduate school in the Northeast. "The last thing I thought I'd be doing was to come work for the bank."
But Mr. Carrion changed his mind after graduating from the Massachusetts Institute of Technology in 1976. He had majored in management information systems and took a job in Popular's controller's office. He said he quickly fell in love with the business. He became the president and chief executive officer in 1990 and the chairman in 1993.
His contribution to Popular early in his tenure was to usher it into the age of technology. "I remember listening to John Reed [who later became the chairman and chief executive officer of Citicorp] when I was at MIT. In a sense, he was a role model, and I really went after the operations piece. … I love the nuts and bolts of the transaction side."
In 1983, Popular installed Puerto Rico's first automated teller machine. One year later it began to link its ATMs to those of other banks and laid the groundwork for its own transaction processing business. Popular expanded its ATM network to Costa Rica in 1996 and the Dominican Republic in 1997.
Last year it combined its technology solution, ATM, and transaction processing businesses under one subsidiary, Evertec Inc. The unit generated only 3%, or $14.2 million, of Popular's profits, but Mr. Carrion said it could generate 15% to 20% within the next five years.
Felix M. Villamil, the unit's president, said he wants to expand the transaction processing business to the mainland and persuade small merchants to become Popular customers.
In January, Popular said that the Justice Department is investigating a project Evertec worked on four years ago as a subcontractor to connect a Detroit school to the Internet. It is unclear how long the investigation will continue, but analysts have few worries that the outcome, including a potential fine, will hurt Popular much.
Ironically, the case may illustrate the notion held by Mr. Monaco and Mr. Slack about how forthcoming Popular's management tries to be when providing information.
For instance, when asked about the Detroit case by American Banker, Mr. Junquera said he did not expect any fine to materially affect earnings. However, when that statement appeared in American Banker on Jan. 20, Popular did not go quite that far in a filing with the Securities and Exchange Commission related to the case; it said it "cannot predict at this time the impact" of the investigation.
Analysts said privately that the incident is an example just how hard management tries to be forthcoming.
Popular's earlier run-in with regulators occurred in 2000, when the Justice Department found a Popular customer had laundered drug money through the Puerto Rican bank. Popular was fined $21.6 million and signed a written agreement with the Federal Reserve Board and a deferred prosecution agreement with the U.S. District Court in Puerto Rico in 2003.
Mr. Carrion insisted that his salary be frozen, and he refused stock options until the matter was entirely resolved last year, when the deferred prosecution agreement was dismissed.
"This was very painful, and I wanted it to be very clear that I was going to feel the pain," he said.
His base salary rose 48% last year, to $800,000, and he was awarded a bonus of nearly $1 million.
Contrary to conventional wisdom, it was Mr. Carrion's great uncle, Jose B. Carrion, not his grandfather, who was one of Popular's founders and its first managing director, though his grandfather Rafael Carrion took control of the company in 1926.
An entrepreneur and sugar merchant, Rafael Carrion was an independent director of American Colonial Bank but lost his board seat when American Colonial sold itself to National City Bank, now Citigroup Inc.
"That upset him so much that he took everything he had and he put it into this little teeny, tiny bank that his older brother had once had something to do with and bought 80% of the bank in one fell swoop," Mr. Carrion said.
In 1956, Mr. Carrion's father Rafael Jr. took over as president.
"We all have lived with the bank all our lives," Richard Carrion said. "That's what was discussed at the dinner table, that's what we saw our whole family in, and it's very difficult to separate the bank from our personal lives."
Last summer his oldest son, Richard Carrion Matienzo Jr., took a job in the Chicago back office. "I have nothing to do with that. I told him it is a very bad idea," Mr. Carrion said, laughing.
