As Mexico’s largest bank, BBVA Bancomer SA already has a 40% share of the lucrative remittance market for the 22 million Mexican immigrants who send money home.
Now the bank, owned by Banco Bilbao Vizcaya Argenteria of Madrid, is aiming to use its name recognition to build a stronger retail presence in the United States. It has picked southern California as its first test market.
It said Tuesday that it is buying the four-branch, $83 million-asset Valley Bank of Moreno Valley, Calif., for $16.7 million in cash.
Though BBVA Bancomer has a commercial banking office in New York and a private banking office in Miami, the Valley deal is its first effort to attract the deposit and loan business of the large and largely unbanked Mexican immigrant population in this country.
“It’s a pilot for us to test the market,” said Julissa Bonfante, an investor relations manager for the Mexican bank in New York. “We aim to target the Hispanic community, particularly the Mexican-Americans.”
Ms. Bonfante said whether the company pursues more U.S. acquisitions would depend largely on how well the experiment with Valley works out.
A number of large U.S. banking companies, including Citigroup Inc. and U.S. Bancorp, have stepped efforts to reach the fast-growing Hispanic market.
Banco Bilbao, which in February bought the stake in BBVA Bancomer that it did not already own, told American Banker in 2002 that it was interested in acquiring California banks. Ms. Bonfante said BBVA Bancomer chose California because that is where the greatest concentration of Mexican-Americans is.
In Riverside County, where Moreno Valley is located, Hispanics make up 36.2% of the population, according to the Census Bureau. Nationwide they are 12.5%.
Valley Bank shareholders would receive $5.48 in cash — about two times book value — for each share owned. The deal is expected to close in the third quarter.
Gene Wood, Valley’s president, said he had not been looking to sell but BBVA Bancomer made an offer that was too good to refuse.
“I would never in my wildest dreams have expected a bank of this size and caliber to come along and buy the Valley Bank,” he said.
Banco Bilbao is Spain’s second-largest bank. It has $363 billion of assets, operations in 30 countries, and 6,924 branches worldwide.
BBVA Bancomer has 25% of the loan market in Mexico and 29% of the deposit market, Ms. Bonfante said.
Though Valley is not in the money transfer business, Mr. Wood estimated that at least 35% of his customers are Hispanic. He said Valley was a good bank to buy for a company looking for growth because it is located along the fast-growing I-15 corridor, which runs from Riverside to San Diego.
The bank focuses on construction lending for residential and commercial clients and has a large Small Business Administration business.
Mr. Wood said he would remain at the helm and does not expect the deal to result in layoffs. “You can never guarantee it,” he said, “but they tell us to keep everybody.”
Ms. Bonfante said that in the U.S. remittance market, BBVA Bancomer has arrangements with the Postal Service, the MoneyGram division of Travelers Express Inc., and even Payless Shoe Stores to do wire transfers.
Bruce Portillo, the director of membership at the Bankers Association for Finance and Trade, an affiliate of the American Bankers Association, said many of the large banks that buy into the U.S. market want to offer retail products. This typically leads them to California, because it is the most populous state, he said.
“There’s plenty to go around,” he said. “All these foreign banks have to do is find their competitive niche.”
BBVA Bancomer has a natural niche among Mexican Americans, Mr. Portillo said, but it would need to develop a market strategy to educate Hispanics about what it could offer them in retail banking.
The market would not be an instant lock for the company, he said, because others, including Bank of America Corp., have developed expertise in reaching the same customers.
“They will have to refine their marketing plan to reach Hispanics who come into the bank for services other than sending money,” he said.
Mr. Portillo said Valley would probably not see radical changes under its new ownership, because BBVA Bancomer would leave the decisions to local management while learning how the U.S. retail market works.
“This little bank … will probably be left alone” as long as it performs as BBVA Bancomer and Banco Bilbao expect, he said. a
