Orders issued under Bank Merger Act - Legal Developments - committee approves merger of Banco Popular de Puerto Rico, Banco Bilbao Vizcaya Argentaria Puerto Rico - Statistical Data Included

Federal Reserve Bulletin, March, 2002 by Robert DeV. Frierson

Banco Popular de Puerto Rico Hato Rey, Puerto Rico

Order Approving the Acquisition of Branches

Banco Popular de Puerto Rico ("Banco Popular"), a state member bank, has applied under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. [section] 1828(c)) ("Bank Merger Act") to acquire certain assets and assume certain liabilities of three branches of Banco Bilbao Vizcaya Argentaria Puerto Rico, San Juan, Puerto Rico ("Banco Bilbao"). (1)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been given in accordance with the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As required by the Bank Merger Act, reports on the competitive effects of the merger were requested from the United States Attorney General and the other federal banking agencies. The time for filing comments has expired, and the Board has considered the application and all the facts of record in light of the factors set forth in the Bank Merger Act.

Banco Popular is a subsidiary of Popular, Inc., also in San Juan, and is the largest depository institution in Puerto Rico, controlling deposits of $9.6 billion, representing 31.8 percent of the total deposits in depository institutions in Puerto Rico ("Commonwealth deposits"). (2) The Banco Bilbao branches that Banco Popular proposes to acquire control deposits of approximately $49.8 million, representing less than 1 percent of Commonwealth deposits. On consummation, Banco Popular would remain the largest depository institution in Puerto Rico, controlling deposits of $9.7 billion, representing 31.9 percent of Commonwealth deposits.

Competitive Considerations

The Bank Merger Act prohibits the Board from approving a proposal that would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking. (3) The Bank Merger Act also prohibits the Board from approving a proposal that would substantially lessen competition or tend to create a monopoly in any relevant market, unless the Board finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effects of the transaction in meeting the convenience and needs of the community to be served. (4)

Banco Popular and the Banco Bilbao branches to be acquired compete directly in the San Juan and Ponce, Puerto Rico, banking markets ("San Juan banking market" and "Ponce banking market"). (5) The Board has reviewed carefully the competitive effects of the proposal in each market in light of the facts of record, including the number of competitors that would remain in the market, the relative share of the total deposits in depository institutions in the market ("market deposits") that Banco Popular would control, (6) the concentration level of market deposits and the increase in this level as measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Guidelines"), (7) and other characteristics of the markets. The transaction is consistent with the DOJ Guidelines and Board precedent in the San Juan and Ponce banking markets.

Banco Popular is the largest depository institution in the San Juan banking market, controlling deposits of approximately $8.2 billion, representing 32.1 percent of market deposits. The Banco Bilbao branches to be acquired control deposits of approximately $36.9 million, representing less than 1 percent of market deposits. On consummation of the proposal, Banco Popular would remain the largest depository institution in the San Juan banking market, controlling deposits of approximately $8.2 billion, representing 32.2 percent of market deposits. Banco Bilbao would remain the fifth largest depository institution in the market, controlling deposits of $2.2 billion, representing 8.5 percent of market deposits. The HHI would increase 7 points to 1695. Thirteen depository institutions, including Banco Bilbao, would compete in the market after consummation.

Banco Popular is the largest depository institution in the Ponce banking market, controlling deposits of approximately $735.6 million, representing 43.1 percent of market deposits. The Banco Bilbao branch that Banco Popular proposes to acquire controls deposits of approximately $12.9 million, representing less than 1 percent of market deposits. On consummation of the proposal, Banco Popular would remain the largest depository institution in the Ponce banking market, controlling deposits of approximately $748.5 million, representing 43.9 percent of market deposits. Banco Bilbao would remain the second largest depository institution in the market, controlling deposits of $241.7 million, representing 14.2 percent of market deposits. The HHI would increase 43 points to 2411. Twelve commercial banks, including Banco Bilbao, would compete in the market after consummation of the proposal. In addition, fourteen savings and credit union cooperative societies ("cooperatives") compete in the Ponce banking market, (8) controlling $290.4 million in deposits. (9)