MEXICO CITY — Mexico's dominant brokerage Monday bought the country's largest bank in a $3.3-billion cash transaction that paves the way for increased competition from Mexico for segments of California banking--especially the growing Latino market.
Besides accounting for more than one-fourth of Mexico's total banking assets, Banco Nacional de Mexico is one of only two Mexican banks with subsidiaries in California. It owns Los Angeles-based California Commerce Bank, which--though tiny--is expected to play a key role in the bank's international strategy under the new owners.
Banamex, as the bank is known, will increase its efforts to serve both the U.S. Latino market and international investors in Mexico, said Roberto Hernandez, the self-made multimillionaire who heads the group buying the bank from the Mexican government.
Hernandez and his partners outbid their sole rival, a consortium of leading industrial families, by 12%. The bank's assets total $27 billion.
For the Record
Los Angeles Times Wednesday August 28, 1991 Home Edition Business Part D Page 2 Column 5 Financial Desk 1 inches; 33 words Type of Material: Correction
California Commerce Bank--Stories in Monday's and Tuesday's editions understated the assets of California Commerce Bank, a Los Angeles-based subsidiary of Mexico's largest bank. The bank's assets as of Dec. 31 were $519.8 million.
The sale was part of the government's ongoing divestiture of its controlling interest in Mexico's 18 commercial banks, which were nationalized in 1982.
Hernandez's group of about 800 investors bought 50.7% of Banamex's shares and agreed to offer another 20% to 1,000 investors representing current management and the interests of bank clients in different parts of the country. The remainder of the shares already trade on the Mexican Stock Exchange.
The cash deal underscored the strength of the investor group--particularly Hernandez's brokerage, Acciones y Valores. The firm, known as Accival, is the largest of the three Mexican brokerages that together manage about two-thirds of the money invested in the Mexican stock market.
"This is the largest cash transaction in the world for a bank that I can remember," said Guillermo Ortiz, undersecretary for banking at the Treasury Ministry. The purchase price was 2.6 times the bank's book value--a slightly lower multiple than the government has received for most of the smaller banks it has auctioned so far.
Hernandez envisions taking on U.S. banks on their own turf, using Banamex's existing holdings as a beachhead.
"California Commerce Bank is small, but it can grow," he said in a telephone interview Monday. Banamex's main U.S. holding now has assets of just $4 million.
Besides offering retail and commercial banking through California Commerce, Banamex also taps the California market by handling a significant share of the money that Mexican workers in the United States wire home to their families.
Hernandez expects to turn that niche into a foothold that will allow Banamex to offer extensive banking services to Latinos in the United States. That would put the Mexican bank in direct competition for a market that has drawn increased attention from California banks in recent years.
"It is a very competitive market," said Ennio Quevedo-Garcia, marketing manager at Bank of America, which in 1988 launched an aggressive campaign to attract Latino customers.
Besides Spanish-language advertising, B of A offers bilingual checks, automated teller machines and telephone service and has developed a video series in Spanish on how to use banks. The bank is also developing ways to attract bilingual and English-speaking segments of the Latino market, he said.
With Latinos accounting for nearly 30% of California's population, most other major commercial banks also are looking for a share of that market, said Quevedo-Garcia.
Hernandez's growth strategy for Banamex stretches beyond the California market.
"The bank already has a strong international presence, and we will be increasing our efforts in the area," he said. Banamex represents MasterCard in Mexico and was the first Mexican bank to tie its automated teller machines into international networks, through an agreement with Bank of America.
The bank is also well-positioned to take advantage of closer economic ties between the United States and Mexico under a proposed North American free-trade agreement, analysts say. Its network of 720 branches, many in remote towns not served by other banks, is ideal for serving both foreign investors and Mexicans working in the United States, Hernandez said.