SCH rides the Mexican wave. México :: Mexico

SCH rides the Mexican wave


Fecha Domingo, diciembre 29 @ 07:29:23
Tema México :: Mexico


With the continued expansion of its Hispanic population, Mexico is where US banks really want to be. So cash-strapped SCH is taking the opportunity to sell a minority stake in its Mexican subsidiary, the country's third largest, for a very handsome profit indeed.

Bank of America (BoA) will pay $1.6 billion to SCH to buy 24.9 percent of Grupo Financiero Santander Serfin, which has 926 branches, assets of $25 billion and a 15 percent market share. Since SCH's entire 98 percent stake has a book value of just $2.2 billion, it has been a very profitable investment.

The sale by SCH follows the €2.7 billion it raised last month by selling stakes in Royal Bank of Scotland and Banesto (see RBI 483). It has also sold its retail business in Peru. Sources in SCH told RBI that those sales had restored its capital position and that the BoA deal was driven by the business benefits. However, they were unable to explain why the RBS stake was sold when BoA had been talking to SCH about investing Serfin for the last nine months.

US banks are increasingly making the connection between the Hispanic markets of Mexico and California. When Citigroup bought Golden State Bancorp, it trumpeted the synergies between Banamex, number two in Mexico, and its new Californian acquisition. Similarly, HSBC claimed that it will reap useful synergies between Household and Grupo Financiero Bital, the two big acquisitions it announced in 2002.

BoA, as the largest bank in California, should also have plenty of opportunities for joint initiatives with Serfin. There are 36 million Hispanic people in the US and BoA claims that 75 percent of them live within its footprint. The two banks expect to be able to take a big share of the market for remittances from Mexicans living in the US, especially as 47 percent of these originate from Los Angeles alone. Commissions on US-to-Mexico transfers exceed $1 billion per annum.

In addition, 5,000 US companies have operations in Mexico, twice as many as in the rest of Latin America. Nearly one-third of these already do business with Serfin and again the two banks hope to capture both ends of their cross-border payment transactions.

Another Mexican acquisition?

Conspiracy theorists are suggesting that SCH wants to make another Mexican acquisition, having been prevented by its weak capital position earlier in the year from buying Bital. After the deal with BoA, it now has money of its own - and a rich partner. As a result, Serfin, with support from its two powerful parents, could afford to make a cost-cutting in-market acquisition that would bring it up to the level of the two market leaders.

Its only serious rival, with the same scope for synergies, might be HSBC. Meanwhile, HSBC is injecting $0.8 million of new capital into Bital, in addition to the $1.14 billion it spent on buying the group.
Lafferty http://www.lafferty.com/
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