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Mexico’s leading banks face new competition

Wave of IPOs could propel ‘mid-sized’ banks; HSBC emerging as a potentially serious player.


The leading Mexican banks face renewed pressure from a resurgent HSBC and also from a potential wave of smaller banks that could conduct IPOs to enable them to pursue rapid growth strategies.

Alejandro Tapia, banking analyst with Fitch Ratings in Mexico City, believes that following Banco del Bajío’s IPO on June 8 there is an “increasing probability of mid-sized bank IPOs” in Mexico – classified as those with market shares of between 0.5% and 2.0%.

Tapia says this segment has shown “an appetite for strengthening the size of their franchises and business profiles” at “a faster rate” than the industry average.

As of March 2017, the aggregated credit portfolios of these banks had grown by 18% year-on-year, which is higher than the system’s average of 12%.

Banco del Bajío’s IPO showed investor appetite for the smaller, faster-growing banks. Bookrunners Citi and Morgan Stanley raised almost $500 million.

The IPO priced toward the lower end of the range (at Ps29.50 per share within the range of Ps29 and Ps32), but then performed strongly in the following days – proving a positive benchmark for future deals.