FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

Banamex – Citigroup forced sales on the table of Mexican Court

Citigroup’s dismal financial state doesn’t grant its chief, Vikram Pandit, much leverage in negotiations these days.

He conceded defeat to Washington on Phibro, deciding that it was simpler to sell the profitable commodities trading unit rather than argue for keeping a risk-taking, capital intensive business that pays megabonuses. But Mr. Pandit has no reason to cave so easily if Citi’s ownership of the Mexican bank Banamex is threatened.

For now, that’s just a possibility. Mexico’s high court is set to decide this week whether to hear a case brought by a contingent of Mexican senators that Citi must offload Banamex because a foreign government owns more than 10 percent of its stock. They want the court to decide whether the finance ministry had the constitutional right to decree in March that the United States government’s 34 percent slice of Citi was acceptable because it was intended to be short term.

FiNETIK Note: The Banamex- Citi cases could also extend to other banks with foreign government holdings like AIG, Bank of America, Bank of New York Mellon, Royal Bank of Scotland. However the strong nationalist sentiments about Banamex do set it above the others.

So Citi is hardly up against a wall just yet — and it reckons any decision to force a sale would breach the North American Free Trade Agreement anyway. But if push comes to shove, the bank should be prepared to put up more of a fight than it did for Phibro.

For starters, Banamex is a full-service bank, not just a trading operation, so Citi has a stronger claim for keeping it. Second, it turns a pretty handy profit. It earned about $750 million in the first half of the year, about half of Citi’s profits from Latin America. As a whole, Citi lost money in the first six months of 2009, omitting one-time items.

And Banamex’s relative success as a retail, commercial and investment bank has turned it into a celebrity within the bank’s corridors of power. At last year’s investor day, Mr. Pandit held the Mexican unit up as an example for how the rest of Citi ought to look.

That makes it a powerful business worth holding on to. And Citi, in large part because of $45 billion in United States taxpayer aid, no longer has to sell profitable businesses just to bolster its balance sheet. Should decisions in Mexico start going against it, the bank has every reason to hunker down for a standoff.

An Alternative View

Just because Banamex is good for Citi doesn’t necessarily mean ownership by Citi is great for Banamex. The United States bank doesn’t help Banamex’s financing costs much, and non-United States ownership could help it attract previously reluctant customers.

Banks in emerging markets can benefit from foreign ownership through lower financing costs, access to an international network and the adoption of proven and trusted processes and technology. It’s not obvious how any of these apply to Banamex.

Its obligations receive no guarantee from the Citi parent company, and its access to financing could even suffer as a result of Citi’s troubles. Moreover, as the second largest bank in Mexico, it is big enough in its own right to get access to international services and acquire the staff and technology needed to be at least as up to date as Citi.

Mexico is a big enough market that its bigger banks are fully competitive, even internationally, without needing help from multinational groups as banks in smaller markets often do. The country is also intensely nationalist, particularly in relation to its neighbor to the north.

Hence, while an independent Banamex might see little difference in relationships with large and sophisticated Mexican companies, it could well benefit from having greater appeal to small businesses, consumers and, from time to time, the Mexican government.

There would be other advantages to Banamex from independence. As a stand-alone bank, it could decide its own strategic goals, organizational priorities and structure. That would most likely be an improvement on fitting in with Citi’s plans, which are currently heavily influenced by its recent losses and government bailouts. Its senior management would have more independence, which might help in attracting the best people.

A ruling forcing Citi to divest Banamex would be hugely disruptive for the bank, but it’s still a possibility. It is in Citi’s interest to object, and there’s a risk any new Banamex owner might not develop the franchise properly. Even so, for Banamex independence could offer attractions.

Source: New York Times, 19.10.2009

Advertisements

Filed under: Latin America, Mexico, News, Risk Management, Services, , , , , , , , , , ,

Actinver Plans Mexican IPO in First Quarter, CEO Madero Says

Actinver SA, a Mexico City-based investment bank, plans to sell shares in an initial public offering in the first quarter, seeking to drum up underwriting business by setting a precedent for its clients to follow.

A sale would show companies needing capital that the equity market is a viable option in Mexico, where the last IPO was in June 2008, said Hector Madero, Actinver’s chief executive officer. He said Actinver is working with a “couple” companies that are considering share offerings.

“We want to provide access to mid-size companies, but the first statement has to be us,” Madero, 44, said in an interview in Mexico City. He said Actinver will sell shares to help open up the market even though it has no pressing need for the money.

A surge in kidnappings in Mexico is discouraging executives from taking their companies public, deepening an IPO drought sparked by the global credit crisis, Madero said. Mexico’s benchmark Bolsa stock index has climbed 32 percent this year, rebounding from a 24 percent slide in 2008.

Actinver, co-founded by Madero’s father in 1994, is “very close in a couple of deals” to underwrite IPOs, the CEO said. The firm co-led last month’s offering of 1.3 billion shares by Cemex SAB, the largest cement maker in the Americas.

The company is completing today the purchase of some of Prudential Financial Inc.’s Mexican assets. The Prudential units, which include a mutual fund business and a bank, bring Actinver’s assets to 109 billion pesos ($8.1 billion), according to Francisco Suarez, an equity strategist at the firm.

Banking License

Actinver acquired a banking license as part of the deal, allowing it to offer investment consulting services for individuals at a network of 70 offices around Mexico.

“We’re not going to be a bank that lends to institutions or corporations,” Madero said. “It’ll be a private bank with a retail business.”

The bank division will be headed by the CEO’s brother Alvaro Madero, currently the director of operations at Actinver.

In June Actinver launched a mutual fund with Brazil’s Itau Unibanco Holding SA in Mexico whose portfolio is mostly Brazilian stocks. Actinver is “very close” to a similar arrangement with a U.S. company, Madero said.

Mexico’s last initial share sale was Genomma Lab Internacional SAB’s $233.7 million offering in June 2008. There have been six IPOs in Mexico since the beginning of 2007, compared with 70 in Brazil, according to data compiled by Bloomberg.

Source: Bloomberg 06.10.2009

Filed under: Banking, BMV - Mexico, Brazil, Exchanges, Latin America, Mexico, News, Services, Wealth Management, , , , , , , , , , , , , , , , , ,

BANORTE buys IXE’s Afore (Pension Fund) business and lists ADR’s as part of it’s Global Expansion startegy

BANORTE (the only remaining 100% Mexican owned bank) is continuing with it’s global expansion strategy. After listing it’s shares on the Spanish / Latin American stock exchange LATIBEX on June 9th and ADR listing in the US Pinksheet OTC market, it acquired the pension fund (Afores) portfolio of IXE bank extending it’s Afore portfolio to 3.5 million accounts. In February 2009 it signed an cooperation agreement with China Development Bank,giving both banks access to bank payment and transfer service in México, China and the USA. (Note by FiNETIK, 11.06.2009)

MEXICO CITY, June 10 (Reuters) – Banorte, one of Mexico’s top banks, said on Wednesday it has agreed to buy a pension fund business from a smaller rival and that it listed its stock on the U.S. over-the-counter market.

Banorte’s (GFNORTEO.MX: Quote, Profile, Research) Generali unit will absorb Ixe’s (IXEGFO.MX: Quote, Profile, Research) 312,489 pension clients, whose combined accounts are worth 5.45 billion pesos ($399 million).The transaction is subject to approval from Mexico’s competition agency. In Mexico, workers in the private sector save for their retirements in pension funds known as Afores.

With this acquisition Banorte will be ranked 4th in Mexico’s Afores account holding, managing a total 3.2 million pension account. (El Universal, 11.06.2009)

In a separate announcement, Banorte said it had listed its stock through pink sheets (GBOOY.PK: Quote, Profile, Research) in the U.S. over-the-counter market. Companies sometimes tap this less-regulated market before leaping into a larger exchange.

Banorte sees the over-the-counter market as a possible prelude to listing its ADRS on the New York Stock Exchange, a bank source told Reuters.

Only a handful of Mexican companies, like tycoon Carlos Slim’s telecom giants America Movil (AMX.N: Quote, Profile, Research) or Telefonos de Mexico (TMX.N: Quote, Profile, Research), trade their American Depositary Receipts on big U.S. markets with healthy liquidity.

Some Mexican corporations have withdrawn their shares from U.S. markets in recent years to avoid tighter scrutiny from U.S. securities regulators.

Source: Reuters, 10.06.2009, Banking News (ADR Depository), 11.06.2009

Filed under: Banking, Latin America, Mexico, News, Services, , , , , , , , , , , , , , ,

Mexican banks choose SunGard for operational risk management

Following recent regulatory changes in the country, a group of Mexican banks have signed up for SunGard’s operational risk management technology.

Invex Servicios Corporativos, DE CV Invex Grupo Financiero, Banco Regional de Monterrey, Institución de Banca Múltiple, Banregio Grupo Financiero, Banco Monex, Institución de Banca Múltiple, Monex Grupo Financiero, Banco Autofin Mexico, Institución de Banca Múltiple and Banco ve por Mas, have all signed for the vendor’s Ambit Risk & Performance platform.

SunGard says Ambit will help the banks identify, quantify and manage operational risk as well as comply with Basel II regulatory requirements. The system will provide them with enterprise-wide loss event tracking and management reporting tools to improve operational efficiency and control risk exposure.

Ana Cecilia Reyes Esparza, president, OpRisk Committee, Mexican Banks Association, says: “We believe that by adopting better operational risk principles and practices, we can manage our economic capital more efficiently. SunGard’s Ambit Risk & Performance solution provides a platform to help us accomplish this.”

Source: SunGard, 08.05.2009

Filed under: Banking, Data Management, Mexico, News, Risk Management, , , , , , , , , , , , , , , , ,

Hits and Errors of Risk Management in the Crisis – 1st Mexico PRMIA Event for 2009 a Success

The first event for PRMIA Mexico in 2009, “Hits and Errors of Risk Management in the Crisis” was hosted by BMV  the Mexican Stock Exchange, headquartered on the prestigious Paseo de la Reforma located at the financial heart of Mexico City.

Carlos Kretschmer, Director Head of Capital Markets at Scotia Bank Inverlat, the sponsor Institution, welcomed more than 220 delegates and guests who attended last Thursday, March 5th, to learn and discuss with a panel of four well known risk managers speakers with great background in theory and practice on risk management.

Juvencio Ramírez, representing Banco de Mexico, prepared and presented: “Current Status of Financial Risk Management “ and “The Mexican Financial System and the Subprime Crisis: Contagion or Defense? – A Liquidity Risk Perspective”.

On behalf Banamex Citibank, Carlos Vallebueno talked about the “Origin and Evolution of the First Global Crisis. Heleodoro Ruiz, Credit Risk Manager at Banorte, followed and focused on the “Common Elements in the Crisis and Lessons Learned – A Credit Risk Perspective”.

Jorge Galindo, CEO of HiTo and Regional Manager of PRMIA Mexico, completed the conference providing the audience with information and details about PRMIA organization. Right after that, the experts opened the panel for discussion and to respond all delegates’ questions.

At the end of the event, the large group of professionals representing national e international bank institutions in Mexico, mortgage and insurance companies, private corporations, among many others, enjoyed a cocktail outside of the Mexican Stock Exchange Auditorium where they were able to exchange points of view and give a pleasant close to a very interesting evening.

Download the Speaker presentations below:
Juvencio Ramirez, Banixco ( Estado Actual de la Admon de Riesgos Financieros )
Juvencio Ramirez, Banixco ( El Sistema Financiero Mexicano y la Crisis de la Suprime )
Carlos Vallebueno, Banamex ( Aciertos y Errores en la Administracion de Riesgos )
Heleodoro Ruiz,  Banorte  ( Impacto Altamente Improbable )

Jorge Galindo,  HiTo ( PRMIA – Credit Risk Management in Times of Economic Stress )
Jorge Galindo, HiTo ( PRMIA Overview )

Source: PRMIA Mexico, 10.03.2009

Filed under: Banking, BMV - Mexico, Latin America, Library, Mexico, News, Risk Management, , , , , , , , , , , , , , , ,

ITAU denies Citi’s Banamex talks, Banamex prefering Mexican Investor group

Banco Itau, Latin America’s largest lender, denied it’s in talks to buy Citi’s Banamex. Itau “is not negotiating any stake in Banamex’s capital,” Itau said in a statement sent to the Brazilian securities regulator.

Meanwhile, according to the local newspaper EXCELSIOR, Roberto Hernandeza and Manuel Medina Mora have been lobbying with PRI lawmakers and the Calderon administration in an effort to persuade the US government to sell BANAMEX to a group of Mexican investors.

According to the article, the group of Mexican investors could buy up to 30% of the bank, list in the Mexican Stock Exchange between 30-40% of the company and get a credit line from either the government or another bank for the remaining stake.

Source: IXE Casa de Bolsa, 05.03.2009

Filed under: Banking, Mexico, News, , , , , , , , , ,

Citigroup-Banamex: Failed US Banks vs. Soild Mexican Institutions

Does the US government’s 36 per cent stake in Citi violate Mexican ownership laws? Have we got our countries confused? No. Citi owns Banamex, a Mexican bank with circa 1,200 branches and 2.6m checking accounts. And Latin American finance blog Inca Kola sees a fight brewing over the Southern subsidiary:

The nub of the issue revolves around Mexican law, which states in crystalline manner that foreign governments cannot own more than 10% of any bank that operates inside Mexico. It’s as clear as a bell and on the statute. So as Banamex is a wholly owned subsidiary of Citigroup (C paid $12.1Bn or so back in 2001 for the bank) if the US Gov’t takes its 36% stake in Citigroup then it will be a larger-than-10% shareholder of Banamex, something against Mexican law. Won’t it?

Mexico’s National Banking ans Securities Commission is therefore investigating, while Banamex is saying that the North American Free Trade Agreement will (somehow) protect it.

Selling Banamex would effectively mean an even worse deal for the US government. The unit’s been described by Citi as one of its “crown jewels”, managing to post an $896m net profit for 2008, making it one of the least toxic parts of the banking group. Banamex is accordingly part of Citicorp — the retail (read: non-toxic) part of the Citi empire. Full Article click here.

Source: FT Alphaville 02.03.2009, Inca Kola News 01.03.2009

Mexico Gov. Studying Effect on Banamex of U.S. Aid to Citi,

(Bloomberg) Mexico’s National Banking and Securities commission said it’s studying the legal impact of the U.S. government’s stake in Citigroup Inc., which owns Grupo Financiero Banamex SA.

The U.S. government announced today it plans to convert as much as $25 billion of preferred shares of Citigroup into common stock. The conversion would give the U.S. a 36 percent stake in the New York-based company. Mexico’s banking law prohibits foreign governments from owning or having a stake in banks that operate in Mexico, like Banamex. Citigroup purchased Banamex for $12.5 billion in 2001.

The commission has asked all banks operating in Mexico that have received help from governments to provide information on the aid, the statement said. The banking commission and other financial authorities will “soon” release information on the study, the body said in a statement.

“The Mexican financial authorities are analyzing the legal implications of the aid that foreign governments have granted foreign financial entities that have subsidiaries in Mexico,” the agency said.

Speculation has mounted in recent weeks that Citigroup may sell Banamex to raise cash and shore up capital amid the global financial crisis. Chief Executive Officer Vikram Pandit flew to Mexico Feb. 19 for two days of meetings with clients, Banamex officials and government officials, including Finance Minister Agustin Carstens and central bank Governor Guillermo Ortiz.

Citigroup fell 96 cents, or 39 percent, to $1.50 at 4 p.m. in New York Stock Exchange composite trading as a record 1.87 billion shares changed hands. The stock has plummeted 94 percent in the past year.

Source: Bloomberg 27.02.2009 Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

Mexican Bank Asset Value

(IXE) According to local newspaper EL UNIVERSAL columnist Alberto Aguilar, ITAU is one of the government’s favorite candidates to acquire Citigroup’s BANAMEX if they have a minority stake in a group led by Mexican investors.Other candidates that have expressed interest are JP Morgan Chase and HSBC.

IXE understands that if Citibank sells Banamex, it will likely sell its BZ.Bradesco branch as well. Due to the fact that Banamex ranks in second in Mexico (assets) and first (equity), along with an important corporate loans book, while the BZ subsidiary present loans book smaller than the ones presented by mid-size banks, and with a lower ROE, which could be higher considering its BZ peers. Furthermore, Citibank BZ does not present important market share in any particular segment in Brazil.

Banamex instead, possess a significant Mexican banking market (see file attached). This would be a very important operation for Itau if it materializes. We believe foreign players could be potential acquirers of Banamex (including Itau) because local players could end up having problems to find funding to finance the operation in the future. If Itau buys Banamex, it will be coherent with Itau’s Roberto Setubal past speeches.

The following is a table of the size of Mexican Banks (Tot. Assets 2Q08 in billion US$)

US$ 53.4 bn BBVA Bancomer
US$ 38.9 bn Banamex
US$ 31.5 bn Santander
US$ 26.8 bn HSBC
US$ 21.0 bn Bannorte
US$ 12.7 bn Inbursa
US$ 10.0 bn Scotia

Source: IXE Casa de Bolsa, 28.01.2009

Filed under: Banking, Mexico, News, Risk Management, , , , , , , , , , , , , , , ,