By: Steve Daniels
Banco Popular is changing its name in Chicago to attract more non-Hispanic customers.
The Puerto Rico-based bank with mainland headquarters in Rosemont will rename its 14 local branches Popular Community Bank beginning Aug. 9. If successful, the new name could be expanded to its 97 locations nationwide.
Banco Popular is investing more than $1 million in the name change; the marketing campaign includes radio and billboard ads, direct mail and new signs.
Manuel Chinea, senior vice-president of retail banking operations at Banco Popular North America, says the current name makes many non-Hispanics believe the bank isn't interested in their business.
"Our name sounds foreign," he says. "It makes it more difficult to overcome that perception. . . . It is a hurdle."
"Our bet," he adds, "is that we'll keep the Hispanic market while at the same time grabbing more of the general market."
Banco Popular, the largest bank in Puerto Rico, cut its North American business substantially after absorbing huge real estate-related losses over the past two years. It closed about 50 mainland branches, including six in the Chicago area. Assets that once topped $13 billion fell to less than $10 billion.
Banco Popular employs 459 at its Rosemont headquarters and at its branches in the Chicago area, where it has had a presence since 1984. Local deposits stood at $1.47 billion, or about 0.5% of the total market, as of June 30, 2009, the most recent data available. That was down 7% from $1.58 billion three years earlier.
Tough times on the mainland led San Juan-based parent company Popular Inc. to try to sell the North American bank in 2008. The attempt was unsuccessful and led to a major restructuring, which is mostly complete. Now, Banco Popular wants to grow again in the region, focusing on amassing retail deposits and making loans to households and small businesses in its key markets of New York, Los Angeles, South Florida and Chicago.
One reason to keep the Rosemont-based holding company operating is a huge potential tax benefit Banco Popular could reap if it stops the bleeding. Banks can partially recover losses suffered in past years by claiming them against taxes they otherwise would pay on current profits.
"If they can eke the U.S. franchise back to profitability, they have a $1-billion deferred tax asset to take advantage of," says Adam Barkstrom, managing director and analyst at Sterne Agee & Leach Inc. in Richmond, Va.
Mr. Chinea says that about half of Banco Popular's mainland customers are Hispanic, and its share of the Hispanic market around its branches is three times what it is for non-Hispanics. But the neighborhoods surrounding its branches are 84% non-Hispanic, he says.
Chicago has the fewest Hispanics of Banco Popular's four major markets, so "we thought we had the perfect lab environment to try this. . . . We should get clear indications in the first six months" if the new name is working, he says.
It's possible that Banco Popular could use two brands on the mainland if it chooses not to change names in New York, where the bank is best-known in North America and has been rooted the longest, Mr. Chinea says. But that's not its preference.
Noticeable Hispanic customer defections would likely force the bank to return to its old name.
"If we see that for every general-market customer we lose one Hispanic, then we're just trading horses," he says.
Source: Chicago Business