Windows of Opportunity

What has been the main focus of your growth strategy over the last five years?

We have focused both on consumers and companies, as a national bank that follows a universal model. Our bank provides a variety of financial services to our customers, becoming a one-stop shop where they can obtain insurance, pension funds, consumer financing, corporate loans, and much more. We like to see ourselves growing steadily in all of our business segments. Over the past few years, we have emphasized personal loans and payroll loans, which have increased significantly. With mortgages, we have followed a strategy different from many of our competitors. We have grown through a program called Infonavit Total Credit, which was formed by a partnership with the government housing authority in order to discount payments for loans according to payroll. This risk profile is different from other mortgage loans. Consequently, we have been able to provide 25% of the mortgage loans issued by the banking sector. Another important point is that we provide financing for our corporate customers. To do that, we use our balance sheet or the market. We have seen important windows of opportunity for our clients to issue debt on the market, and we were able to provide financing of about $23 billion in 2011, largely through placements on the market. We have consistently been ranked as number one in terms of the placement of local debt.

Which activities, sectors, and trends are driving demand in lending?

Our bank provides financing in every segment, including energy, power, and technology. It would be difficult to say that there has been one area lagging behind. For example, telecommunications has been very active, and although our bank has not been heavily involved in housing development financing, we have made progress when compared to other institutions.

SMEs account for more than 5 million companies in Mexico. What do they represent for your lending portfolio?

The SME segment is relatively small, but the growth has been significant. We have grown 17% in SME lending. I firmly believe that we have found the right model to continue this growth pattern.

In terms of credit supply, which sectors of the economy are you more active in?

We have been very active in many sectors, but most recently we have been involved in financing petrochemical operations. Another segment we are working in is channeling the supply of financing, which is comprised of suppliers in various governmental agencies. We are working to be more active in infrastructure, which has slowly picked up. We have been pioneers in infrastructure financing, in some cases in partnership with Mexican development banks.

How would you evaluate Banamex’s financial performance in 2011?

It was a great year for the franchise. In consumer credit, we consistently registered the highest indications of growth. On the other hand, 2011 was a difficult year for many markets. We are probably the most important market maker in Mexico, which leaves us relatively exposed to the movements of the economy. However, we consistently do very well, and although last year was a more difficult year, our performance was excellent in terms of our financial strength and capitalization levels. This was the first time that the market was not moving in line with the strong fundamentals of the Mexican economy, but we remain the strongest bank among the competition in Mexico.

How would you assess the development of electronic banking in Mexico?

Online banking has been growing more rapidly than other transactions in terms of access over the past few years. We believe that the most important change will happen with the product that we are about to launch, the electronic wallet. This product is more than online banking; it offers the ability to use a mobile phone to make payments and transfers between users. The electronic wallet is also an important tool for financial inclusion in Mexico, which is why we enhanced our partnership with América Móvil. Now, customers can transfer an amount directly to anyone’s telephone, which functions as the user’s banking account number. Mexico continues to be an economy that is very intensive in the use of cash, but payment methods will change significantly with the introduction of our product. This may be the most important development in terms of the way we do banking, not only in Mexico but also in Latin America.

What is your strategy for banking the “unbanked”?

The possibility of using mobile phones to do banking is the most important strategy. The other is growing our correspondent network. We are in the process of closing a deal with an important chain of convenience stores, creating an additional 10,000 sales points. With this alliance, we can grow to 14,000 locations in villages or small towns where there are no banks of any kind.

What is your outlook for the banking sector in Mexico in the medium term?

We were well prepared for the world financial crisis in terms of having the adequate regulatory framework. In any event, the banking system is very well capitalized, with a 50% average of core capital. The system is also well reserved, and the authorities have made adequate risk decisions in terms of exposure. We are prepared to adopt Basel III, which is unusual for the banking system of a country. The Mexican banking system is strong; bearing in mind the behavior of the sector before the crisis, it has been growing steadily in terms of assets, at a double-digit rate in a sustainable way. If we link this trend with the emergence of the middle class in Mexico, I would say that we expect to continue registering adequate growth rates for the economy. We expect that the growth of the banking system will continue to be three or four times more than the growth of the economy, which also means higher penetration. One of the important advantages is that we have had microfinancial stability, which is necessary when growing portfolios such as mortgage loans. It is difficult for customers to take out a long-term loan at a variable rate as was done in the past. Having good prospects of economic growth will spark increased penetration of the banking system, more growth, and the development of new financial products and innovations as well as new ways to provide cheaper financial services to the middle classes and emerging markets.