Top of the heap: A breakdown of the leading players in the Mexican market

Banking regulators in Mexico treat the seven largest of the 21 financial groups operating in the country as a distinctive group. The top seven include Spain’s BBVA Bancomer and Santander, Mexico’s Banorte and Inbursa, America Banamex (which has been controlled by Citigroup since 2001) HSBC and Canada’s Scotiabank. The list is made up of two Mexican and five foreign firms.

Total Assets

In December 2013 all seven banks held MXN5.13trn ($398.3bn) in combined assets, 78.4% of the national banking system’s total of MXN6.5trn ($505.05bn). BBVA Bancomer is the largest with MXN1.37trn ($106.45bn), or 26%, followed by Banamex with 22.8% (MXN1.17trn, $90.9bn), Santander with 15.7% (MXN806.7bn, $62.6bn), Banorte with 14.9% (MXN768.8bn, $59.7bn), HSCB with 9.9% (MXN510.8bn, $39.6bn), Inbursa with 4.9% (MXN253.69bn, $19.7bn) and Scotiabank with 4.7% (MXN242.02bn, $18.8bn).

Lending Activity

Loans reached MXN3.03trn ($235.4bn) in 2013, and the concentration was even higher than in assets as 84.8% of the total was held by the country’s top seven banks. As with the assets, BBVA Bancomer and Banamex were the leaders, with market shares of 23.5% and 16%, respectively, trailed by Banorte (14%), Santander (13%), HSCB (6.8%), Inbursa (6.5%) and Scotiabank (4.9%).

The average credit-to-assets ratio of the system is 46.3%, lower than the 50.1% average for the top seven. Inbursa was the bank with the highest ratio at 78%, while Scotiabank (61%), Banorte (55%) and BBVA Bancomer (52%) also had ratios above the average for the top seven. HSBC had the lowest ratio at 40%, and Banamex (41%) and Santander (49%) were also below the average for the group. While the group held 84.8% of total credit, the concentration was lower in commercial (82.2%) and consumer credit (83.9%), while being much higher in the housing segment (94.9%). BBVA Bancomer was the leader in the three segments. Its market share of the commercial credit portfolio was 20.1%. The second largest, Banorte, had 15.3% and Banamex had 13.2%. The bank in the top seven with lowest share was Scotiabank with 3.5%, which was even lower than a bank that was not among the top seven, Banco de Bajío with 4.3%. On the consumer side, BBVA Bancomer had a 27.9% market share, while Banamex had 24.7% and Santander held 10.3%. This was the only segment in which 50% of the market was held by only two banks. Banco Azteca, which is not part of the top seven, had a market share of 6.4%, above HSBC’s 5.9%, Inbursa’s 2.4% and Scotiabank’s 3.9%. BBVA Bancomer’s share of mortgages was 30.3%, Santander’s was 17.7% and Banorte’s 15.9%. Inbursa had the lowest share at 0.24%.

Meeting Needs

In some segments, regional and specialised banks are becoming significant players in niche markets, although some of these banks are much smaller than the leaders. In the personal credit segment, Banco Azteca, which is the 11th largest by assets, had the highest share at 24.4%, and Banco Ahorro Famsa, the 27th largest by assets, had a market share of 8%.

In the auto segment, Volkswagen Bank occupied the fifth position with a total market share of 5.6%, despite being only the 36th largest by assets. This segment is highly concentrated, and BBVA Bancomer alone was responsible for 39% of lending. When Scotiabank (17%), Inbursa (15%), Banorte (15%) and Volkswagen Bank are added, the five account for 92% of all auto loans. Banco Interacciones, which was the ninth largest in terms of assets, ranked third in the loans to government agencies segment with a total market share of 11.8%.

The role of smaller banks could be reinforced in the next few years with the creation of licences for banks specialising in specific types of credit in 2012 by the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, CNBV). Mario Maciel, director-general of CI Bank, told OBG, “The new licences could be a good opportunity for second and third generation banks, but we can’t really tell yet whether this will have a real impact on the banking sector. What needs to be addressed by these new players is the fact that even in small sectors, banking remains a business of high investment and infrastructure.”

Total customer funds (including short- and longterm deposits, debt securities and interbank lending) stood at MXN3.42trn ($265.7bn), of which MXN2.8trn ($217.5bn), or 83.7%, was held by the top seven banks. The group held 90% of short-term deposits and the bank with the highest share was BBVA Bancomer (26%), while Inbursa had the lowest (3%). The concentration of long-term deposits was not so high at 77%, with Banorte recording 18% and Inbursa 2.7%.

Bringing In Cash

In terms of profitability, the top seven accounted for 88.6% of the system’s net revenues in 2013, or MXN94.8trn ($7.36trn) out of a total of MXN107.07trn ($8.3trn). BBVA Bancomer presented the highest value at MXN30.8trn ($2.4trn), or 28.8% of the total, and HSBC had the lowest at MXN2.14trn ($166.27bn), or 2%. In 2013 total net profit for the sector grew by 23.5% over 2012, and for the top seven banks growth was higher at 27.6%. Inbursa had the highest growth rate at 189.2%, while HSBC and Scotiabank saw a decrease of 46% and 28%, respectively.

With 11%, or MXN11.8trn ($916.8bn), of the total net profit and only 3.9% share of assets, Inbursa had the highest return on assets (ROA), with 4.75%, followed by BBVA Bancomer (2.4%) and Santander (2.3%). The three banks were also above the system’s average of 1.7%. Banorte’s ratio was 1.62%, Banamex recorded 1.42%, Scotiabank had 1.2% and HSBC saw 0.4%. Looking at the other profitability indicator, return on equity (ROE), four of the top seven banks were above the sector’s average of 15.8%. BBVA Bancomer recorded an ROE of 24.5%, Inbursa 21.1%, Santander 18.7% and Banorte 16.5%. However, Banamex with 12%, Scotiabank with 9.1% and HSBC with 4.5%, were all below the average. Inbursa ranked fifth in terms net profit in absolute terms, but it had the highest ROA and the second-highest ROE. BBVA Bancomer had the highest absolute net profit, the highest ROE and the second-highest ROA. HSBC had the least favourable performance among the top seven banks, with the lowest net result, ROA and ROE. While the sector ROA increased by 17% from 2012 to 2013, HSBC’s ROA dropped by 46% and Scotiabank’s by 35%. Inbursa had the highest growth at 171%. The ROE overall for the sector increased by 13% for the same period. HSBC, Scotiabank and Banorte saw reductions in ROE of 54%, 32% and 3%, respectively. The best performance was also seen by Inbursa, which had an increase in ROE of 167%.

The total capitalisation index (índice de capitalización, ICAP), the index of basic capital (índice de capacidades básicas, ICB) and the index of basic capital 1 (ICB1) were higher for the sector overall than for the top seven banks. The ICAP in the sector was 15.5%, slightly higher than the top seven’s average of 15.2%. ICB was 13.5% for the sector against an average of 13% for group, and a 13% ICB1 sector average was higher than the 12.5% for the top seven. Among the top group, Inbursa was the bank with higher ratios in all the three indexes, while Scotiabank had the lowest ICAP at 12.3%.

Additional Factors

From 2012 to 2013 the ICAP in the sector fell from 15.9% to 15.5%, and the average for the top seven fell from 15.5% to 15.2% during the same period. More specifically, Banorte, BBVA Bancomer and HSBC all saw increases in their indexes, while the remaining four banks saw decreases. On February 2014 Banamex reported to CNBV that it suspected fraud on loans to Oceanografia that were based on alleged contracts of the latter with the state-owned oil company Pemex. Because of that, Banamex’s ICAP was revised from 14.2% to 13.8%, which also led to the ICAP for the sector to be reduced from 15.6% to 15.5%. The case is still under investigation by the CNBV.