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Article on banking in Mexico


Rabbitisrich
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http://www.economist.com/node/21563291

 

The countries’ changing fortunes are partly due to slowing growth in China, a big buyer of Brazilian commodities and bitter rival of Mexican manufacturers. Thanks to higher Chinese wages and the rising cost of shipping across the Pacific, Mexico is increasingly attractive to foreign investors.

 

Private debt is equal to only about 20% of GDP, one of the lowest ratios in Latin America (Brazil’s is above 50%). Only a third of all Mexican firms have access to commercial-bank loans; among small firms, the proportion is lower still.

 

Part of the stinginess is due a strict credit-scoring regime, operated by two private agencies that are owned mainly by the banks themselves. Rather than be graded, customers are classed simply as creditworthy or not. There is no lower limit on the default necessary to trigger a blacklisting, so a missed phone-bill could render someone ineligible for loans. Fines for missed tax-payments can also land people on the blacklist. “So because you were fined 500 pesos ($40) by the tax authorities, you cannot get credit to buy a car, which would contribute 10,000 pesos in VAT,” complains Giulliano Lopresti of Crea México, an organisation that helps small businesses to get off the ground.
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Well .... not many public banks until tomorrow.

 

Santander prices Mexican IPO in middle

http://www.ft.com/intl/cms/s/0/4cc083ca-075f-11e2-b148-00144feabdc0.html#axzz27Wfd5hhn

 

In the first half, Santander Mexico’s net income rose 18 per cent to $720m from $615m a year ago. That performance helped to swell Santander Mexico’s contribution to global profits during the first half of this year to 12 per cent – even though it represents only 4 per cent of its assets.

 

 

El Citi pobre

http://www.breakingviews.com/santander-can-teach-citi-the-art-of-breaking-up/21040212.article

 

Next up is a 24.9 percent stake in its Mexican business. At the top of the indicated price range, the unit will be valued at $17.2 billion, or just over two times book value, or assets minus liabilities. The offering could bring in $4 billion of capital for the Spanish parent’s coffers. It would also join listed foreign subsidiaries including Brazil, Chile, Argentina and Poland, as well as its Spanish retail network Banesto. Listings of the company’s UK bank and U.S. consumer finance arm are also on the horizon.

 

The lesson for Citi and other global banks is how this approach in effect sets a floor under Santander’s overall market worth. Combine the Spanish bank’s stakes in just its three largest Latin American units - Mexico at the top of the IPO range, Brazil and Chile - and the total valuation comes to some $49 billion. That’s 67 percent of the parent’s $73 billion capitalization accounted for by unarguable public market prices.

 

Apply the concept to Citi. For starters, take the New York-based bank’s Mexican operations. At the same multiple Santander Mexico would fetch at the top of the IPO range, Citi’s Banamex arm would be worth over $20 billion - though the unit’s lower return on equity probably warrants something less. Still, that’s more than a fifth of Citi’s $94 billion market cap. And it’s by no means Citi’s only valuable foreign operation. Credit Suisse estimates that Citi’s Asian businesses are worth almost $40 billion on a standalone basis.

 

There are other ways Citi could showcase its assets. While Santander has chosen to list geographic entities, Citi could opt for a combination of regional and global listed subsidiaries. Citi’s transaction services division, known as GTS - a world-leading financial plumbing business - will generate $4 billion of net income next year, Nomura estimates. At 12 times earnings, around where Bank of New York Mellon trades, GTS would be worth some $48 billion. At Citi’s current valuation, that would imply that its institutional securities and wholesale banking arm plus the global consumer banking empire is only worth just over three times earnings.

 

 

 

 

 

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If Citi were to do the same sort of transaction as Santander, bolster its reserves where they need to be bolstered, and then start buying back stock with the rest of proceeds (perhaps the Fed would let them do so if they could release a couple of billion from selling off stakes in their foreign subsidiaries), that would be phenomenal.  I might buy back into Citi. 

 

Plan, Santander or Citi at this point?

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If Citi were to do the same sort of transaction as Santander, bolster its reserves where they need to be bolstered, and then start buying back stock with the rest of proceeds (perhaps the Fed would let them do so if they could release a couple of billion from selling off stakes in their foreign subsidiaries), that would be phenomenal.  I might buy back into Citi. 

 

Plan, Santander or Citi at this point?

 

Bank of America?

 

Citi is OK and re-bought a few speculative A warrants.

 

Santander is the best large retail bank in the world and it is VERY cheap. But no TARP warrants and things in Spain keep getting worse (while the US keeps getting better.) Also, I don't know of any fixed currency that has survived 20%+ unemployment even in a dictatorship ... that Spain is not (the last I heard is that the Generalissimo is still dead.)

 

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If Citi were to do the same sort of transaction as Santander, bolster its reserves where they need to be bolstered, and then start buying back stock with the rest of proceeds (perhaps the Fed would let them do so if they could release a couple of billion from selling off stakes in their foreign subsidiaries), that would be phenomenal.  I might buy back into Citi. 

 

Plan, Santander or Citi at this point?

 

Bank of America?

 

Haha. ;D  Great answer. 

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