PUERTO RICO (Hispanic Business) September 2004  - Say “Carrion” or “Banco Popular” and most people think “Puerto Rico.” But since 1961, when Popular, Inc., followed Puerto Rican migration to New York and opened its first branch in the Bronx, the people’s bank—under the leadership of the Carrion family since 1893—has gained increased market share on the mainland. With 100 branches in California, Texas, Illinois, New Jersey, New York and Florida, U.S. subsidiary Popular North America ranks among the country’s 30 largest financial institutions.

The formula for its success? “We really are a community bank,” says Richard L. Carrion, chairman and CEO of Popular, Inc., which boasts assets of $39.6 billion and is on course to have more assets outside Puerto Rico than on the island within 10 years.

Today, as Latino purchasing power, small businesses and remittances to Latin America soar, Hispanic entrepreneurs are launching their own specialized banks. But Carrion, a self-described “intellectual bohemian” with degrees from both The Wharton School at the University of Pennsylvania and MIT, has his eye on a wider horizon. Already a top SBA lender to U.S. small businesses, Popular is leveraging cutting-edge technology in electronic banking to expand not only in the U.S., but throughout the Caribbean and Latin America.

HISPANIC Trends caught up with Richard Carrion this summer shortly before Carrion, who heads the Olympics Finance Commission, headed to the Athens 2004 Olympic Games.

Q. Banco Popular was established at a time when Puerto Rico was under Spanish rule. Tell us about the history, the role your grandfather played and how that leads up to you opening the Nasdaq on the 110th anniversary of the company in June.

A. Many people believe that my grandfather founded the bank, but that’s not quite the case. My grandfather was born in 1891, and the bank was founded in 1893. While he was a very precocious guy, well, he was not that precocious. There was an older brother of his who was one of the original founders, but … it was really the force of an idea that founded the bank in 1893, and that idea was to provide services to all the segments of the population. And that’s what we’ve been faithful to for 110 years.

I was honored to open the Nasdaq a few weeks ago, and I have to tell you, while that was a thrill, a bigger thrill was that for four or five days, they were running our logo and some of our ads on the side of that building, which is the world’s largest LED screen—right there in Times Square. And to just be honest with you, I went a couple of nights, and I just stood there in Times Square and watched our sign come up—it would cycle like every 10 minutes—and I must have stayed there for 40 minutes or so, just watching it cycle through like some farm boy from the Midwest in the middle of Times Square. I would get a thrill every time I would see our name there, truly thinking of my father and thinking of my grandfather, wishing they could be there. I got a sense that we really have come a long way. It was just a great thrill to see our names there.

Q. The merger of Citigroup and Travelers a few years ago was a main event in the industry because it helped bring down the regulatory walls that separated the banking and insurance industries. How did that precedent have an impact on your company?
A. I think the Citigroup-Travelers deal was agreed upon before the laws were passed; and they managed to get the legislation—the Gramm-Leach-Bliley Act. But to me, we like to go where we can add value and we feel, in the insurance arena, where we can add value is in the distribution area of insurance. And we’ve been doing that. We have acquired a couple of agencies, and that has worked.

Q. Are we talking about the U.S. or Puerto Rican market? Or both?

A. Both markets. That’s what has worked out for us, the distribution end. At some point, we would want to get our feet wet in the underwriting arena. But our feeling so far has been to tread very carefully here.

Q. Tell us about Quaker City and the merger. How does it add value to Popular?

A. We like Southern California a lot. We have a great team there. We’d like to expand that business quite a bit and we’d like to fill out the area between L.A. and San Diego. Quaker City goes a little bit more inland, but it is run very well, and we think we can probably add some product to some of the business they already have. It was an additional 27 branches in Southern California. So, once this is approved, we will have 40-odd branches in Southern California, which begins to get you noticed.

Q. Popular has shown its muscle by acquiring Quaker City. Would Popular ever consider a merger where somebody buys Popular?

A. That’s not our objective, and it’s certainly not my objective. We made a decision, years ago, to try to retain our independence. We have a mission, and we want to stay focused on that mission. With that said, I am the CEO of a public corporation. I do have fiduciary rights. I’m also a shareholder, and I know what I would prefer.

Q. The Hispanic consumer in the United States is a hot commodity. How does Popular capture this market? Are there specific tiers of the U.S. Hispanic market that you are focusing on?

A. Many, many people look at the Hispanic market, look at the projection of the numbers of Hispanics, and so on, and they have some ethnic marketing department. We don’t really look at it that way, to be honest. We have a focus on the community. While we happen to be in many Hispanic communities, it’s baffling to me when people are astonished that 50 percent of our customers are non-Hispanic. They seem surprised by this, as if 100 percent of our customers would be Hispanic. When you stop and analyze it, it’s a little silly. I mean, what is it, that we Hispanics are different in some way? Do we like our account statements with hot sauce or something? It’s a little strange to me why people would think only Hispanics would bank with us.

There are specific areas where there are particular needs. For example, we have a subsidiary called Popular Cash Express, which does a lot of check cashing and remittance processing, that kind of thing. And that serves a section of the population. There, it is maybe 80-90 percent Hispanic where we set up these shops. I guess that’s my take on it. We are the largest SBA lender to minorities. We focus on the small business and we focus on the individual end, but aside from that, we are just a community bank, which happens to be in communities where there are more Hispanics than the average place.

Q. At the same time, studies show that Hispanics in the United States have fewer bank accounts than mainstream consumers.

A. That’s an excellent point. We have been making strides in that area. Partly, our strategy in the Popular Cash Express is to bring these folks into the banking system. We do quite a few seminars and have set up accounts, acceso accounts, which can be opened with a matrícula, to try to make it easier for folks to open their first accounts. In that sense, you are absolutely right: It’s a market that needs a little more hand-holding. It’s much less of a bank market than your mainstream market.

Q. The U.S. Federal Reserve Board has introduced interest-rate increases. What kind of impact does this have?

A. Long-term rates have not increased quite as much as short-term rates, so we have not seen much of an impact yet [on the mortgage side]. If it gets beyond 200 or 300 basis points—if it goes beyond 200 basis points—I think it’ll start being felt, but we don’t see that right now, at least not for another 18 months.

Q. There have been attempts to set up Puerto Rico as a free-trade zone, similar to Bermuda. What’s the status on that?

A. There have been efforts through the years to get legislation through. There is currently a lot of talk about opening a large shipping port on the southern end of the island where a free-trade zone would also operate. But, remember, we are under federal law so that is something Congress would have to get involved with.

Q. Your neighbor, the Dominican Republic, has a new president, Leonel Fernandez. He took over in August and has been actively trying to restructure the country’s debt. Would Popular have any interest in having a role in that restructuring?

A. No. That’s not really what we do. Popular has operations in the Dominican Republic. We run the ATM and POS switch in the Dominican Republic. We also have an investment of 20 percent in one of the banks, Banco Hipotecario Dominicano. So, we’re not looking to really increase any holding of government debt.

Q. Speaking of another neighbor, Cuba: Does Popular have any plans in the event that the country opens up to the U.S.?

A. I have been there twice, because of my Olympics work. I’ve met with the head of the Cuban National Bank on a couple of occasions. He would love for us to get over there, and I’d love to be there as well. But under current law, we can’t do it. So, as soon as the law allows it, you can bet we would explore that. I hope that before I retire, we’ll see some branches of Banco Popular in Cuba.

Q. It’s a little known fact that you are the head of the Olympics Finance Commission. Tell us about that.

A. It’s something that gives me a lot of satisfaction. Something I do, obviously, for free, but I get quite a bit of satisfaction because I think the Olympics are one great vehicle for bringing the youth of the world and the people of the world together. It’s a great instrument for peace. It has added a great dimension to my life and it’s something I do very happily.

Q. Going back to the U.S. market, how does Popular capture the estimated $30 billion that U.S. Hispanics send to relatives in Latin America?

A. Well, we have Popular Cash Express that I told you about, and that’s one way we do that. We are looking at our ATM networks. We have ATM networks in lots of these places. We run the ATM network in the Dominican Republic, in Costa Rica, in El Salvador. So, we are looking at a lot of these countries because we think eventually, that’s how it’s going to evolve. To lower the cost of the transaction you have to make them electronic.

Q. So, the idea is to have the ATM network in the native country?

A. That’s right. And we need to get involved in the processing side of that. It is a big part of our business, which we are growing through a company called Evertec.

Q. Where would you like to see Popular in 10 years?

A. In 10 years, I would envision that we will have grown to maybe three, four times our size. It will be clear by then that our assets and our presence outside of Puerto Rico will be much bigger than our presence in Puerto Rico. But to me, the most important thing is that the character of the company, the vision and the values that we stand for remain exactly the same.