Aiming to strengthen its already strong position on the island commonwealth, Spain's Banco Santander is negotiating to buy the Puerto Rico banking unit of another Spanish bank, Banco Central Hispano Americano.
Executives at Banco Santander in Puerto Rico declined to comment on the talks; executives at Banco Central could not be reached.
However, senior bankers in Puerto Rico said Santander is close to concluding a deal. They said Santander has agreed to pay slightly more than $300 million to acquire the $2.7 billion-asset, 12-branch wholesale banking operation.
Analysts said they found the price somewhat high, but not unreasonable. "Santander has done extraordinarily well in Puerto Rico and is known for making good investments that yield a high return," said Inigo Lecubarri, a banking analyst with Salomon Brothers Inc. in London.
The deal is the second big recent transaction in Puerto Rico, just behind Norwest Corp.'s $475 million acquisition of Island Finance from ITT Corp. last year, and it underscores the ongoing consolidation of banking in Puerto Rico. It will boost Banco Santander's branches on Puerto Rico to 72 from 60 and its assets there to more than $7 billion from $4.6 billion.
Santander has expanded quickly outside Spain in the last few years and recently more than doubled the value of its 30% holding in First Fidelity Bancorp when the New Jersey-based bank agreed to be acquired by First Union Corp.
The Spanish bank ranks second on Puerto Rico behind BanPonce Corp., which has $15 billion in assets, and just ahead of Citicorp, which has some $2.7 billion in assets.
Santander, a $134 billion-asset, Madrid-based bank, entered Puerto Rico 20 years ago by buying the First National Bank of Puerto Rico. In 1978, Santander bought Banco Credito y Ahorro Ponceno, adding 13 branches. The Spanish bank then acquired 20 more branches with the purchase of Bayamon Federal Savings Bank in 1989, and another 36 branches with the purchase of Caguas Central Federal Savings Bank in 1990.
"They already have a strong presence in Puerto Rico and they're keen to develop the international side of their business outside Spain," said Bryan Crossley, a banking analyst with ABN Amro Hoare Govett in London. "This would obviously consolidate their position in that market."
Banking sources predicted Santander is likely to close or sell off some of Banco Central's branches after the deal is completed.
Central last year sold off 10 retail branches in a move to refocus on wholesale banking.