Madrid's Banco Popular Espanol SA is entering the U.S. market with a $300 million cash deal for TotalBank, a $1.4 billion-asset Miami institution.
Roberto Higuera, Banco Popular's chief financial officer, said the $121 billion-asset company wants to expand into the United States because of its "strong growth potential, very clearly defined and transparent legal framework, low political interference, and free market play."
When it came down to targeting specific markets, Banco Popular focused on California, Texas, and Florida, Mr. Higuera said in an interview. Miami trumped other cities because it is a high-growth market with Spanish-speaking customers.
Though moves into California and Texas may happen eventually, he said, for now the focus is on Florida with its "growth potential, the mix of business, and also the high component of Hispanics."
"There are still plenty of growth opportunities for" TotalBank, he said, "both through organic growth and through acquisitions."
TotalBank has 14 branches and about 250 employees in the Miami area, where it is the fifth-largest independent bank, according to a Banco Popular presentation. The company had $920 million in deposits at March 31 and about $983 million in loans. Its net interest margin was 4.23%, and its nonperforming asset ratio 11 basis points.
Banco Popular is the third-largest banking group in Spain with a network of more than 2,400 branches throughout Spain, Portugal, and France. It follows other Spanish banks into the U.S. market. Banco de Sabadell of Barcelona agreed this year to buy the $580 million-asset TransAtlantic Holding Corp. in Miami for $175 million in cash, and Banco Bilbao Vizcaya Argentaria SA of Madrid became one of the largest banking companies in Texas by acquiring Texas Regional Bancshares Inc. of McAllen in November 2006.
BBVA expanded on its Texas holdings when it bought State National Bancshares Inc. of Fort Worth in January. And Banco Santander Central Hispano SA of Madrid recently increased its stake in Philadelphia's Sovereign Bancorp Inc. to about 25%.
"There is a natural affinity in terms of language and culture, and they have a very strong conviction in Spain that Spanish banks have the ability to run a retail bank as well [as] if not better than the Americans," said Robert B. Albertson, chief strategist at Sandler O'Neill & Partners LP.
"From a market share point of view," he added, it is a "potential additional growth avenue for the consolidated companies."
Mr. Higuera said Banco Popular considers itself more a "local" player than its Spanish rivals because its stable of 11 bank brands operate under their own names, as will TotalBank.
"We are not trying to be the biggest bank. We are not trying to be a big player in the world. We are trying to be the most profitable bank, the most efficient, and very safe," Mr. Higuera said.
Banco Popular aims for returns on equity of about 25%, he said. Sustaining that track record "is what we intend to do in the future, and what we intend to do in Florida," he said. The TotalBank deal is expected to be immediately accretive to earnings, he said.
Adrienne Arsht, the chairman and majority shareholder of TotalBank's parent, Total Bancshares Corp., said she decided to sell because the bank needed more capital in order to grow. In an interview she said she and her stepson control 92% of the company.
"As majority shareholder, I wanted to broaden the capital investment. I started to look for investors, and in so doing I came upon Banco Popular — that wanted to buy the entire bank. They didn't have anybody on the ground, and needed a complete package deal."
Ms. Arsht, 65, said she sold the company "for the sake of the next generation, the employees, the ability to grow. TotalBank has the management, and now it has the capital to forge forward."
All employees will keep their jobs, she said. The deal is expected to close by yearend.
