Banking: Central America moves out of financial backwater
As HSBC buys Banistmo for $1.8bln, analysts predict that the region is ripe for consolidation.
HSBC’s $1.77 billion purchase of Banistmo, central America’s leading banking group, has cast a bright light on a region that for decades was considered a financial backwater. A free-trade agreement with the US, almost $10 billion in annual remittance flows and a move away from coffee towards more sophisticated exports means central America is now one of the richest pickings in Latin America for banking acquisitions.
That has also been underscored by Scotiabank’s move into El Salvador and Costa Rica this year. “We believe acquisitions in central America are first on Scotiabank’s radar screen,” says Andre-Philippe Hardy of Merrill Lynch.
HSBC’s acquisition of Banistmo will give it a presence in five central American nations, as well as Colombia. Its portfolio will include El Salvador’s financial conglomerate, IFB; Costa Rica’s Corporación Banex; and Honduras’s top bank, Banco Grupo el Ahorro (BGA), as well as insurance businesses in several countries. The deal clearly strengthens HSBC’s position in Latin America but leaves it without a presence in Guatemala, central America’s largest economy, which has a banking system that is wide open to consolidation. Guatemala has 24 banks, down from more than 30 in 2000, in a poor country of 12 million people.