Boosted by the winds of economic recovery, Sabadell United Bank has weathered the recession and is now steering a course for growth.
Over the past five years, the Miami-based bank has doubled its total assets and deposits and tripled its loans and leases, thanks in part to the deep pockets of Spanish parent Banco Sabadell, the acquisitions of several rival financial institutions and the launch of new lending divisions.
“We like to think of ourselves as a ‘super-community bank,’” said Mario Trueba, Sabadell United’s chief executive officer. “We’re big enough to be involved in the major businesses that we want to be involved in, but in dealing with clients, we feel boutique-y and we feel small.”
While core businesses and markets remain the top priority, bank executives are now talking about opening branches or acquiring competitors in Orlando and Jacksonville, the two biggest Florida markets in which Sabadell United has yet to establish a foothold.
The growth at the bank is despite a series of new federal and international regulations designed to enhance risk management and reduce the risk of money laundering. Those rules have increased costs for banks around the world but especially for those in South Florida, which has been specifically targeted by federal banking regulators.
“When you’re dealing with money from Latin America, and that’s something very common in this region, it heightens the scrutiny,” said Mitchell Mandler, an attorney at Becker & Poliakoff who specializes in banking law. “It requires more diligence, more staffing, more risk analysis.”
The high-end crowd
Sabadell United isn’t exactly a place for people walking in off the street.
It primarily serves wealthy individuals, small- and medium-sized businesses, law firms, developers and other high net-worth clients. It also works with foreign clients who are moving to or working in South Florida. Many of those clients are passed on by the Sabadell International Branch, a sister bank based in Miami that caters to customers from abroad. Sabadell International is also owned by Banco Sabadell.
“Our market segment is fairly narrow,” Sabadell United president Dwight Hill said. “We’re not trying to be that ubiquitous retail bank on every street corner.”
Its core businesses are professional and corporate lending,commercial real estate, residential mortgages and private wealth management. “Those are the pillars,” Hill said. “We are trying to spur development and business activity in the communities we serve.”
Most of the bank’s branches are in Miami-Dade, Broward and Palm Beach counties, although it also has offices in Tampa Bay, Naples and Sarasota.
In its previous incarnations as United National Bank (until 1998) and Mellon United National Bank (until 2010), the bank specialized in lending to professionals and smaller businesses, especially law firms. But after the recession began to wind down, Sabadell United ramped up its efforts in residential lending and private wealth management.
So far, the efforts have been successful. Profits are rising consistently. In the second quarter of 2015, Sabadell United reported $7.8 million in net income, a 28 percent gain from the second quarter of 2015. Its total assets stand at $4.9 billion.
The bank holds about 1.6 percent of deposits in the local market, according to the most recent report from the Federal Deposit Insurance Corp., which was issued last year. That may not sound like a lot, said Ken Thomas, an independent local bank consultant and economist, but because Florida is the fourth-biggest banking market in the country, it’s actually quite significant.
In terms of deposits, Sabadell United has the 15th-highest total in Miami-Dade, Broward and Palm Beach counties, the FDIC found.
That ranking includes major national players such as Wells Fargo (16.7 percent of the local market), Bank of America (15.4 percent), Citibank (8.1 percent), and SunTrust Bank (6 percent). Look at just banks with local headquarters, and Sabadell trails only BankUnited (4.7 percent), Mercantil Commercebank (3 percent) and City National Bank (2 percent). It also competes with banks, such as Northern Trust and Gibraltar Private Bank & Trust, that also almost exclusively chase high-net-worth clients.
“Sabadell United is a well-run bank with strong local roots,” Thomas said. “Its strength is documented by the fact that it made it through the financial crisis despite the problems not only here but especially in Spain, which had its own banking crisis.”
New lines of growth
The bank was born when Banco Sabadell, Spain’s fourth-largest bank, bought Mellon United National Bank in 2010 and renamed it Sabadell United Bank. The bank then merged with Miami-based Transatlantic Bank, which it had owned since 2007.
Since then, Sabadell United has made acquisitions of its own, acquiring Lydian Private Bank out of receivership from the FDIC in 2011 and Doral-based JGB Bank last year.
That first purchase allowed Sabadell United to ramp up its private wealth management division.
Orlando Roche, now regional president for the bank in Miami-Dade, headed up Lydian’s private banking and joined Sabadell United after the acquisition.
“Miami has become a very attractive place for wealthy people from Latin America to live,” Roche said. “They’re also bringing their businesses here.”
That has meant open season for banks trying to lure those clients into allowing them to manage their money.
“Wealth management is a huge business,” said Manuel Garcia-Linares, a banking lawyer at Richman Greer. “We’re seeing more and more banks getting into that line of business.”
Competition is fierce. In addition to established players like Northern Trust and Gibraltar, Miami-based TotalBank has opened a private wealth business. Private equity shops, hedge funds and family offices also compete for those same clients.
“How do you compete? It’s really by service,” Roche said. “Most banks think they are very different. But at the end of the day, the only thing that is really different is the level of service you provide.”
But updates to the Bank Secrecy Act, the Patriot Act and other anti-money laundering laws have driven up costs for banks that do business with clients from abroad.
Trueba said the bank has tripled its compliance staff in the past decade and spent big bucks on software programs, accounting firms and consultants that can help the bank navigate regulations and ensure that its customers are handling clean money.
Those costs add up.
“It has cost us profit and a small number of clients, but it is a cost of doing business,” said Trueba, who has worked at the bank and its predecessors for 26 years and is Sabadell United’s first and only CEO. “You have to have a very good reputation, especially if you want to grow and acquire other banks.”
And the regulations put more of a burden on smaller banks, Trueba added. “We’re at a size where we can absorb the costs as we scale up.”
Another area that Sabadell United has expanded is residential lending. It’s a relatively new business for the bank, but it’s part of a larger strategy to keep Sabadell’s clients in-house for as many services as possible.
“When I came on, we had about $60 million in residential mortgages,” said Howard Levine, who was hired to run the bank’s home lending division in 2012 and is now an executive vice president. “This year we’re on track to do half a billion.”
Levine said the bank operates mainly at the high-end of the market, with most homes averaging around $1 million.
But it is also launching a 10-percent-down loan with no insurance payments to help qualified low-income borrowers buy their first house. “We’re looking for more community partners to help us get the word out,” Levine said.
The bank is also considering creating a student loan consolidation program to help employees of firms that have accounts with Sabadell United.
“These are two of the big issues of our day: student debt and affordable housing,” said Hill, who was appointed president of the bank in April.
And as the rest of the state catches up to South Florida in recovering from the recession, Trueba and Hill say they are eyeing expansion in Tampa, Orlando and Jacksonville, the biggest markets where Sabadell United doesn’t operate.
“We’re looking for a diverse base of economic support,” Hill said. “If you’re operating in Tampa, Orlando and Jacksonville, that’s a good counterbalance to the local market on the east coast.”
But the bank says it is moving slowly.
“Acquiring a bank is a business in and of itself,” Hill said. “We’ve had a lot of informal conversations with a lot of folks, but we’re not in negotiations yet.”
Fernando Pérez-Hickman, chairman of the board at Sabadell United, said caution will always be a virtue for bankers.
“We want to keep doing what we’ve been doing,” Pérez-Hickman said. “The truth is that you don’t want to be too exciting.”
Sabadell United Bank
Business: Sabadell United Bank was formed in 2010 when Banco Sabadell, Spain’s fourth-largest financial institution, acquired Mellon United National Bank for $160 million and renamed it. Later that year, Sabadell United merged with Miami-based Transatlantic Bank, which the Spanish banking giant had bought for $175 million in 2007. Mellon itself had been known as United National Bank, a well-respected local institution, until 1998, when it was purchased by Mellon Financial. Like many local banks, both Transatlantic and Mellon were exposed to South Florida’s toxic real estate market. “The timing wasn’t the best,” said Fernando Pérez-Hickman, chairman of the board of Sabadell United and managing director of Sabadell Americas. But the Spanish giant showed patience and Sabadell began expanding its residential lending and private wealth management divisions, in addition to its core businesses of commercial real estate and professional lending. It also acquired several rivals, including Lydian Private Bank and JGB Bank of Miami. Today, Sabadell has total assets of $4.9 billion, deposits of $3.9 billion and loans and leases of $3.6 billion. It is considering an expansion into the Orlando and Jacksonville markets. Although it primarily serves the wealthy individuals and businesses, Sabadell has also launched a mortgage program for qualified low-income buyers and is considering a student loan consolidation program. It is complemented by their Sabadell International Branch, which serves foreign clients, including several major Spanish companies that do business in South Florida. The international arm opened in Miami in 1993 and has acquired the local private banking businesses of BBVA International and Lloyds.
Ownership: Banco Sabadell, of Spain.
Headquarters: Sabadell Financial Center, 1111 Brickell Ave. in Miami.
Management: Fernando Perez-Hickman, chairman of the board. Mario Trueba, CEO. Dwight Hill, president. Orlando Roche, regional president for Miami-Dade County.
Branches: 18 in Miami-Dade, four in Palm Beach, two in Broward, one each in Collier, Hillsborough and Sarasota.
Total assets: $4.9 billion.
Quarterly net profits: $7.8 million for second quarter of 2015, up 28 percent year-over-year.
Total capital ratio: 14.8 percent. The FDIC standard for a “well-capitalized bank” is 10 percent.
Bauer Financial rating: Five stars.