Published: August 25, 2004 in Knowledge@Wharton With Hispanics now constituting the largest minority in the United States – some 40 million people – their appeal to financial institutions is growing. Spanish banks are taking advantage of their strong presence in Latin America to move into the United States, even as U.S. banks are trying to take advantage of the growing Hispanic presence in their country to expand into Latin America.

 

For the moment, the financial institutions that serve this market are focused on sending remittances, a business that will amount to $30 billion this year, according to BID, the Inter-American Development Bank. That is more money than all the foreign direct investment in the region. The Hispanic market is extremely attractive for Spanish and American banks because most Hispanics do not even have a bank account yet; in countries like Mexico, credit accounts for only 10% of GDP.

 

Banks have recently been taking steps to win over this market. Last January, BBVA, Spain’s second-largest bank, acquired a 40.6% interest in Bancomer, Mexico’s largest bank. In May, Bancomer’s U.S. subsidiary, Bancomer Transfer Services, purchased Valley Bank, a small institution in southern California. Although Valley Bank has only six offices, the acquisition will allow Bancomer to provide financial products to the U.S. Hispanic community.

 

Last March, Spain’s largest bank, Banco Santander Central Hispano, joined forces with Bank of America, the second-largest U.S. bank, to buy 24.9% of Serfin, the third-largest Mexican financial group, at a cost of $1.6 billion. Shortly thereafter, the two partners underwrote a $200 million capital increase to finance the growth of their subsidiary.

 

Meanwhile, Citigroup, the world’s largest financial group, is continuing its typically aggressive strategy. Citigroup and Banamex – its Mexican affiliate and the second-largest bank in that country – have launched a bi-national credit card for sending financial remittances.
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