Latin Finance - November 2008 - 30

of the 2008 Storm Protected with 2.36%, compared to a system-wide o one can yet be sure how much average of 1.95%. Mexico’s economy will suffer next Mexico year from the global credit mess Best Bank - BBVA Bancomer and US slowdown. Over the past several SME Scrap years, its banks have lent ever more according to Fitch, low by regional In 2009, Bancomer plans to continue aggressively as they try to poach customers standards, but asset quality issues could targeting lending growth in the mortgage, from each other and recruit from the lower- prevent competitors from taking more risk. consumer and commercial sectors, albeit at earning unbanked masses. A slowdown in Foreign institutions including HSBC and a more moderate pace. It insists it will lending is inevitable in 2009, with Fitch for Santander have been more aggressive in continue to target those left outside one seeing growth of 5%-12%, after several higher-yield, more delinquency-prone Mexico’s banking system, a tactic that years of rates above 20%. products like credit cards. supported the addition of one million clients BBVA Bancomer held 25% of the during the 12 months to July. deposits in Mexico’s banking system as of “In the coming years, where I see the June, according to Moody’s, maintaining a most competition in the market is in the dominance over rivals Banamex (18%), segment of PyMEs [small and medium sized HSBC (14%) and Santander (13%). This is enterprises],” says Juan Pablo Ávila, BBVA up from 24% at year-end 2007. Bancomer’s director of commercial banking. Its commanding position in total assets He says that regardless of economic growth, – 748.6 billion pesos, according to Fitch, this is a critical sector of the economy which banks will be fighting over, and which he over 200 billion pesos higher than secondexpects will have grown by 60% year-onplaced Banamex – has widened since 2007. year in 2008. Building from efforts to Its net income led the system in the first provide short-term working capital to half of 2008 (11.6 billion pesos) and at PyMEs begun several years ago, Bancomer year-end 2007 (19.8 billion pesos). recently started offering permanent working This dominance again earns Bancomer Competition in PyMEs: Ávila capital and equipment financing. the nod for LatinFinance Mexico Bank of Bancomer has the strongest commercial the Year. In 2007, first position left it best lending portfolio, 155 billion pesos as of Banorte is another institution wellpoised to attack new customers among the placed to weather any 2009 turmoil, for June according to Fitch, compared to Mexico’s unbanked. This year, size leaves the same reasons of safer lending and the bank best cushioned to withstand Santander’s 120 billion pesos and Banamex’s asset quality. The last remaining large shocks likely to hit the system in 2009. 105 billion pesos. The agency finds a low indigenous bank in Mexico is however “Bancomer is one of the banks that is delinquency in the sector, but there could better positioned to face still be an increase from US this turmoil,” says financial fallout. Leading Mexican Banks (First Half, 2008) Alejandro García, senior Ávila says the bank is not Bancomer tops the charts director with Fitch in yet giving an expectation for Assets Loans Net Income Mexico. “There is a systemgrowth rates in 2009, but he (MXP, bn) (MXP, bn) (MXP, bn) ROA (%) NPL (%) wide effect with asset adds that it will continue to Bancomer 748.6 485.9 11.6 3.2 2.5 quality problems, but focus on expanding in retail Banamex 545.4 271.5 3.6 1.3 3.6 Bancomer is among the and commercial lending. He Banorte 312.5 214.1 3.5 2.4 1.4 banks that have a stronger expects more moderate Santander 440.9 244.6 3.4 1.6 2.1 ability to contain those increases for BBVA HSBC 374.1 195.0 2.2 1.2 4.6 problems.” Key strengths of Bancomer and its Source: Fitch Bancomer include competitors. sustained strong earnings BBVA Bancomer will and the fact that it is a deposit-funded have to manage expansion carefully. Across much smaller than Bancomer, with institution with diversified revenue streams, assets of 313 million pesos as of June, all products, it has seen non-performing García adds. loans rise to 2.50% in June from 2.31% at and generating lower returns. A robust deposit base will better protect Bancomer’s return on assets was 3.19% the end of 2007, according to Fitch, in line Bancomer from loan deterioration. Bank with the average for the six largest banks, in the first half, first among Mexico’s loans in Mexico represent 15% of GDP, who went to 2.71% from 2.43%. LF large banks, while Banorte was second N 30 LATINFINANCE November 2008

Latin Finance - November 2008

Table of Contents for the Digital Edition of Latin Finance - November 2008