Mexico Starts Sale of State-Owned Banks

Mexico has begun the long-awaited sale of its 18 government-owned commercial banks by placing three small regional banks on the auction block, the Finance Ministry announced Monday.

The government will begin taking bids today on Banpais, Banca Cremi and Multibanco Mercantil de Mexico--three banks with combined assets of more than $4 billion.

Selling the banks, which were nationalized in September, 1982, is one of the last major steps in a privatization drive that began when Miguel de la Madrid took office in December, 1982. His successor, Carlos Salinas de Gortari, has continued the sale and closure of government-owned companies.

The announcement indicates Mexico’s determination to move ahead with selling its controlling interest in the banks, which is expected to bring $4 billion to government coffers despite concerns of some outside observers that the U.S. economic downturn and especially problems in the U.S. banking industry would reduce the list of possible buyers.

“We had always planned to sell to Mexicans, so events in the United States are irrelevant,” a senior Finance Ministry official said.

Foreigners may buy up to 30% of the shares in each bank, although no single investor may own more than 10%.

However, few foreign banks have expressed a strong interest in buying shares, the Finance Ministry official said. Currently, the only foreign bank allowed to provide full services in Mexico is Citicorp.

Multibanco Mercantil and Banca Cremi were exactly the kinds of mid-size banks that analysts had expected the government to sell first. Voteless shares (known as CAPs, a Spanish acronym) of both banks trade on the stock market, establishing their worth and making investors familiar with them.

The only slight surprise was Banpais, which is considerably smaller than the other two banks and is one of three commercial banks that has never issued CAPs.

“They are three attractive banks, yet small in size,” said Rogelio Ramirez de la O, director of Ecanal, a Mexico City-based economic analysis firm.

“They cannot wait that long to start getting banks out on the market because the market is drying up,” he said.

Appraisals of larger banks are expected to be more complex in part because of complicated agreements involving interbank credit lines, a result of the foreign debt crisis that began in 1982.

However, the real financial powers in Mexico, represented by the brokerage firms that are also investment bankers, will wait for the larger banks to come up for sale, said Jonathon Heath, coordinating director of Macro Asesoria Economica, a Mexico City economic consulting firm.

The most likely buyers for the banks being offered are industrialists in the regions the banks are strongest, he said.

Two of the banks, Banpais and Multibanco Mercantil, are concentrated in the northern industrial state of Nuevo Leon. Multibanco Mercantil has assets of $2.5 billion, according to documents filed with the Mexican Securities Commission. No asset figure was available for Banpais.

Banca Cremi, with $1.6 billion in assets, is strongest in the state of Jalisco, whose capital, Guadalajara, is Mexico’s second-largest city.

Government officials also have expressed a commitment to sell the banks to groups that reflect diverse national and regional interests. Historically, financial power has been concentrated in the capital.