Banorte emerges as a possible winner of Banamex; will need $4 billion in additional capital: HSBC

After Santander’s withdrawal from the competition for Banamex, Banorte emerges as the likely winner, ahead of Carlos Slim’s Inbursa or German Larrea, but the financial institution chaired by Carlos Hank González will need additional capital of around 4,000 million dollars for the operation, considered HSBC Global Research.

The financial institution said the price of Citigroup’s consumer and corporate banking business in Mexico would hover at $11 billion, down from its previous estimate of $12 billion.

“Following Grupo Santander’s announcement on July 22 that it would not progress to the next stage in the Citibanamex sale process, we believe that Banorte is now the main contender to buy the asset; other bidders include GF Inbursa (as part of a consortium with other Mexican groups, but the structure is not defined) and Grupo México, either independently or together with Inbursa”, HSBC assured.

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In this sense, the firm’s analyzes indicated that the bank led by Hank González will require an additional capital of 4,000 million dollars on average, equivalent to 23% of Banamex, with a price of 11,000 million dollars of Banamex and a minimum capital level of 10%. the number of existing shares.

However, he said that Banorte could reduce or eliminate the need to raise capital to finance the deal by taking debt at the level of the holding company, i.e. the Financial Group, and use it to pay for the acquisition .

And, he added, the debt will not affect the capital ratios of the bank, which is the regulated entity, although it will of course increase the group’s leverage; but it will also reduce shareholder dilution and potentially improve earnings-per-share accretion, which management has identified as the main criteria for the deal to proceed.

“In principle, bank holding companies in Mexico cannot borrow, but Banorte was granted an exemption in 2013 for the acquisition of Afore Bancomer and Generali’s interest in Seguros Banorte. “We believe the authorities can be persuaded to grant another waiver given the precedent and the express willingness of lawmakers to see Banamex return to Mexican ownership,” he said.

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Lee: Banorte hires Bank of America as advisor; present non-binding offer for Banamex

Banorte was one of the first interested parties in Banamex, since last January, after the sale was announced, its director Marcos Ramírez assured that they would begin the analysis of the operation, but in July of this year it turned out that the bank was a non – binding offer.

Another interested party is the richest man in Mexico, Carlos Slim, through Inbursa and another Mexican businessman to jointly participate in the process of buying and selling Citi’s business.

It also appeared that Daniel Becker-owned Grupo Financiero Mifel would be interested and looking for investment partners, in addition to miner Germán Larrea.

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