HSBC and Bradesco, Brazil’s
second-largest privately-owned bank, are both targeting the Mexican
retail banking market with ambitious acquisition and investment
plans in anticipation of the country emerging from its worst
recession since 1995, reports Douglas Blakey.
Bradesco is to acquire Mexican-based
Ibi Mexico for an undisclosed sum in a deal expected to close by
the end of the first quarter, while HSBC will invest $700 million
to increase the operating capital of its Mexican subsidiary by
around 30 percent.
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Bradesco’s purchase represents its first
international retail banking deal and is an extension of the BRL1.4
billion ($749.1 million) Brazilian agreement last year between the
bank and Ibi’s parent, Cofra, the Swiss-based holding company that
also owns the C&A retail chain (see
RBI 614).
Operating within C&A’s 50 Mexican-based
stores, Ibi’s portfolio of 1 million customers and loan book of
around $100 million offers Bradesco the opportunity to grow its
credit card, insurance and consumer finance interests in the
country.
“If we consider the size of the market,
obviously Mexico is an extremely important market,” Bradesco’s head
of credit cards, Marcelo Noronha, told analysts.
But, according to Bradesco, the Ibi purchase
does not herald plans for further international expansion in the
short term, with organic expansion in Brazil the focus of its plans
in 2010.
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By GlobalData“The market for acquisitions is very
restricted; there was a rapid consolidation of the industry in
Brazil in recent years so our focus is now on organic expansion,”
said Bradesco president Luiz Cappi.
On 28 January, the bank said it would invest
BRL4.2 billion in its domestic operations in 2010 with spending on
its IT infrastructure and a net increase of 250 bank branches key
to its plans.
Details of Bradesco’s domestic plans coincided
with release of its full-year earnings for fiscal 2009: net
earnings increased by 4.8 percent to BRL8 billion from BRL7.6
billion a year earlier.
HSBC confirms $700m
investment
An HSBC spokesman told RBI the bank’s
$700 million investment will “be used to remodel all 1,190 branches
in Mexico by 2012; there will also be an increase in lending and
investment in technology”.
News of the investment coincided with a
bullish economic forecast from the Bank of Mexico, the country’s
central bank, on 27 January, raising its forecast for growth in
gross domestic product for 2010 and 2011 to between 3.2 percent and
4.2 percent after contracting by around 7 percent in 2009.
The HSBC spokesman said the bank is
enthusiastic about participating in the growth of the local market,
adding: “Mexico is one of the countries where the group is most
interested and sees strong future growth potential.
“This investment marks a new stage for the
bank, and we foresee very good opportunities in the years to
come.”
In particular, HSBC is attracted by the
country’s changing demographics, with 16 million potential new
customers reaching adulthood in the short term while low
bancarisation rates (around only 20 percent) offer scope to target
the unbanked segment.
The move last year by the National Banking and
Securities Commission to allow ten of the country’s banks –
including Citi’s local subsidiary Banamex, HSBC, Banorte,
Scotiabank and Wal-Mart – to set up networks of banking
correspondents is also expected to accelerate a growth in customer
numbers among low-income Mexicans (see
RBI 624).
HSBC expects credit penetration rates to rise
sharply; a doubling of the rate would serve only to bring the
country back to 1994 levels while a three-fold increase would
result in a similar ratio to neighbouring Chile.
HSBC’s Mexican investment plans include:
• Further enhancement of its Tier 1 capital
ratio (13.27 percent in November 2009, according to the Mexican
National Banking and Securities Commission – see table below);
• Growth of the bank’s cards portfolio. With
cash remaining dominant and accounting for around 75 percent of
retailers’ sales, the bank forecasts huge potential to increase
credit and debit card penetration;
• Growing its share of personal loans,
mortgages and consumer credit as well as ramping up its SME loan
book;
• Strengthening its customer service
infrastructure and distribution network; it has remodeled or
relocated 345 of its 1,190 Mexican branches and will do the same
with the remaining units by 2012 with 250 scheduled for a makeover
in 2010; and
• The bank’s network of 6,300 ATMs will be
expanded while older existing ATMs will be replaced with modern
models.
HSBC’s capital injection in Mexico takes its
total local investment to around $3 billion since it paid more than
$1 billion for the then fourth-largest bank in the country, Grupo
Financiero Bital in 2002.
Net profit at the unit fell by 57 percent
year-on-year to MXN1.56 billion ($120 million) in the first nine
months of 2009, following a drop in fee income and sharp rises in
loan impairments.
|
Assets |
|
|
Mexico – largest banks by assets, |
|
|
Assets (MXNbn) |
|
|
BBVA Bancomer |
1,186 |
|
Banamex |
1,036 |
|
Santander Serfin |
710 |
|
Banorte |
578 |
|
HSBC |
444 |
|
Inbursa |
232 |
|
Scotiabank Inverlat |
150 |
|
ING |
108 |
|
Ixe |
94 |
|
Interacciones |
60 |
|
Source: CNBV |
|
|
CAPITAL |
|
|
Mexico – Tier 1 capital ratios of |
|
|
% |
|
|
Inbursa |
21.57 |
|
Banamex |
17.98 |
|
Scotiabank Inverlat |
16.63 |
|
Interacciones |
16.15 |
|
ING |
15.70 |
|
IXE |
15.41 |
|
BBVA Bancomer |
14.88 |
|
Santander |
13.58 |
|
HSBC |
13.27 |
|
Source: CNBV |
|
RBI
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