Community leaders concerned as bank tries to attract other groups

Jimmy Rodriguez, a noted Puerto Rican restaurateur, seems like the last person the leading Puerto Rican bank in the country would want to lose as a customer.

But when he tried to refinance a 10-year-old debt through Banco Popular to renovate his flagship Jimmy’s Bronx Cafe, the U.S. subsidiary of the San Juan, Puerto Rico, bank turned him down, he says, without explanation. Mr. Rodriguez says his stellar credit was recognized by North Fork Bank, which issued a loan commitment within a week.

“Banco Popular didn’t tell me that the numbers didn’t make sense or that I didn’t have enough cash flow,” Mr. Rodriguez says. “The answer was, `Not at this time.’ ”

Whatever the bank’s reasons-it declined to comment, citing client confidentiality-its rejection of one of the pillars of the local Puerto Rican community is playing poorly among Hispanic business and social leaders. It helped to crystallize the growing feeling that they are not well served by a bank with roots stretching back four decades among the city’s Puerto Ricans.

While community leaders are concerned about everything from disrespectful treatment in the branches to the opening of check-cashing operations in low-income areas, their chief complaint is that Banco Popular is too tightfisted.

Reputation is crucial

“I think that they are really viewed as the bank of the community,” observes Lorraine Cortez-Vasquez, president of the Hispanic Federation. “The issue with them is that they sometimes don’t take enough risk as far as lending in the community.”

Banco Popular’s reputation among Hispanics remains crucial, particularly in New York, where its 32 branches account for a third of its 96-branch U.S. network and, at $2.5 billion, 44% of its total assets. It also has branches in Illinois, Texas, California, New Jersey and Florida.

Banco Popular can’t afford to take its customer base for granted as it strives to expand around the country and appeal to people of different ethnic groups. That’s partly because large competitors, including Citigroup, are hungrily eyeing the burgeoning Hispanic population.

“We will never back off on the success we have had with the Hispanic population,” insists Christine Summers, senior vice president and director of Community Reinvestment Act compliance at Banco Popular.

But there is a perception that the bank is backing off, fueled by, among other things, minimal marketing aimed at Hispanics. Voices in television ads, for instance, pronounce “Banco Popular” without a Latino accent.

“The bank is trying to serve both Latino and non-Latino markets,” says Chuck Gonzalez, regional chairman of the U.S. Hispanic Chamber of Commerce. “There is some question about whether it is meeting the expectations of what represents its core market, where there is some residual expectation that it is a Latino bank.”

Merely `satisfactory’

There is more than anecdote to support the notion that Banco Popular has pulled back on its lending. Its current CRA rating, issued last year by the Federal Reserve Bank of New York, is “satisfactory,” down from “outstanding” in its previous rating.

In the 2002 report, the Fed noted sharp declines in the number of residential and small business loans in the New York metropolitan market from 1999 through 2001, when the total number of such regional loans plunged 43%.

CRA reports rate banks according to how extensively they lend, invest and deliver services in low- and moderate-income areas. Examples of banks with a current rating of “outstanding” include HSBC Bank USA and J.P. Morgan Chase & Co.

Hispanic business leaders also have raised issues of how the bank treats them and other customers in the branches, where, they say, workers can be curt and downright rude to patrons.

Ms. Summers says that Banco Popular has already started to improve its lending record, and that this will be reflected in future CRA reports. The bank is working to perk up its record on funding large-scale community development projects, by, for example, upping its commitment to major housingdevelopments in New York City to $40 million from $6.8 million last year.

Seeks to improve rating

The bank will follow those construction projects with mortgage loans to low- and moderate-income people moving into new units in places like Bushwick, Brooklyn, bank officials say.

Banco Popular is making those commitments partly to improve its CRA rating, which could help smooth the way for acquisitions. The bank’s stated goal is to double in size in two years, an aim that until recently had been stymied by a money laundering scandal at Banco Popular’s parent company in Puerto Rico. Regulators blocked the bank from buying other institutions until the issue was resolved.

Ms. Summers says the decline in small business lending came about because of economic problems in New York during 2000 and 2001, including the Sept. 11 attack, which resulted in higher unemployment. “Those unemployment rates impacted credit ratings and all kinds of things,” including taxi medallion loans and franchise lending, she notes.

The Banco Popular executive attributes a decline in mortgage lending in part to the bank’s making a transition from originating loans through brokers to originating its own loans and having them serviced by Cendant Corp.

Check-cashing offices

But other steps by the bank lead some Puerto Rican community leaders to question how truly committed the bank is to helping low-income people. Rather than steering immigrants into its banks and educating them about the U.S. banking system, it has opened four check-cashing offices in New York City that generate fees for Banco Popular every time a customer cashes a check.

Despite their growing concerns, some leaders say it isn’t too late for Banco Popular to make amends.

“I put all of my personal finances into Banco Popular because I believe strongly in supporting Hispanic institutions,” says Rossana Rosado, publisher and chief executive of El Diario/La Prensa. “I would hope that they feel the same way.”

CAPTION(S):

NO SERVICE: Restaurateur Jimmy Rodriguez was rejected by Banco Popular. El Diario/La Prensa publisher Rossana Rosado hopes it supports Hispanic enterprises.