The July follow-on issued by Mexico’s largest domestically owned financial group, Banorte-Ixe, can be viewed as a microcosm of the wider economy. Although almost exclusively a domestic Mexican business, and despite having to announce some short-term negative news, the company attracted international investors around the world. (Banorte’s exposure to the troubled, three-largest Mexican homebuilders was substantial but containable, at about 2.2% of its loan portfolio, and much of that exposure was secured against land values.)
The growth outlook for retail banks in Mexico is probably unmatched anywhere else in the world: credit penetration among the population relative to GDP is lower than in Afghanistan and yet economic fundamentals and the medium-term outlook are much rosier for Mexico than for that war-torn comparator. More than 200 accounts bought Banorte shares: the $2 billion sale was upsized to $2.5 billion, and even at that level the deal was 3.4 times oversubscribed.
“Banorte is a very local company and we were able to sell stock in Singapore, Abu Dhabi, Toronto and Brazil in just one week of roadshows,” says Alejandro Valenzuela, CEO of Banorte-Ixe. “The name recognition [of Banorte] today transcends borders. Sixty percent of total demand came from international accounts and I think that tells you that Mexico is an open economy.”
David Ricardo Suárez, head of investor relations and corporate development at Banorte-Ixe, says the high demand also reflects the solidity of the Mexican financial system, painfully rebuilt following the tequila crisis of 1994 that plunged the country’s banks – bloated on fast credit expansion – into difficulties, the effects of which, Suárez says, are still being felt.
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