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Best Bank: BBVA Bancomer |
Mexico has had a tough 12 months. The economy shrank 5.9% in the first quarter of 2009 compared with the fourth quarter of 2008 – the steepest decline since the Tequila crisis in 1995. This translates as a quarter-on-quarter drop of 21.5%. Worse might still come. A dramatic drop-off in tourism, which earned Mexico $14 billion last year, is expected in the aftermath of swine flu.
As the banks prepare to struggle through a tough year, those that have provisions in place and stable earnings are likely to be the safer bets. The leading banks in Mexico – HSBC, BBVA Bancomer and Banamex – all continue to run prudent, profitable operations. But profits have been hit.
At the end of 2008, Banamex reported a 28% drop in net profits compared with 2007, whereas BBVA Bancomer’s dropped 16%. In the first quarter of 2009 the Mexican commercial banks registered a 20% year-on-year decline in net profits, according to the local banking regulator. Banamex reported the largest earnings, Ps5.24 billion ($390 million), with BBVA, the country’s largest bank, second with Ps4.93 billion in profit. However, even though Bancomer reported a slightly smaller profit, its banking operations account for more of its bottom line performance.
BBVA Bancomer has also taken steps to prove its leadership in Mexico by opening another 20,000 points of sale in 2008 and installing a further 761 ATMs. The bank reported an increase in penetration and linkage in the medium-sized companies segment. Financing these companies increased 37% in annual terms in 2008, while the number of clients with credit increased 28% versus 2007.
Ahead of the crowd
HSBC moved ahead of the crowd in the Mexican debt market this year, using its strong balance sheet to clinch deals with several of the leading issuers: Pemex, Telmex and Cemex. HSBC topped the tables and was the number one underwriter in Mexico for local and international bonds. The bank also worked with Credit Suisse and Deutsche Bank in February to bring the Mexican sovereign to market with a $1.5 billion, five-year deal. Although it was the second sovereign deal in three months, it was two times oversubscribed. In December, Mexico reopened the international debt markets for emerging market investors with a $2 billion bond through Goldman Sachs and Morgan Stanley.
The M&A market in Mexico has been relatively quiet. In the past 12 months, JPMorgan completed four M&A deals, more than any of its competitors. The US bank advised InterGen on the $305 million acquisition of two power station assets, Seguros ING on its $1.5 billion sale to Axa, the Noche Buena gold project on its sale to Fresnillo for $30 million and Cemex on the $210 million sale of its Tenerife assets to Cimpor Cimentos de Portugal SGPS.
