Spaniards Buy Into Mexican Bank

In the first foreign investment in Mexico’s recently privatized banks, a Spanish financial group this week purchased a small stake in Grupo Financiero Probursa for $10 million.

Beyond the 2% investment, Banco Bilbao Vizcaya, Spain’s largest financial institution, also may provide technical assistance to Probursa.

Probursa, which owns a brokerage and other financial service companies, became the first private owner of a Mexican bank in nearly a decade when it paid $204 million for controlling interest in Multibanco Mercantil de Mexico in June, 1991.

Foreign investors may own up to 30% of a financial group that owns a bank. Direct investment in a bank is limited to 10% and requires government approval.

“Everybody expects that if things work out well, (Bilbao Vizcaya) will increase their investment,” said Ravi Vish, senior investment officer at International Finance Corp., which engineered the deal. The agency, which is the private investment arm of the World Bank, invested $7.5 million itself to gain a 1.5% interest.

The International Finance Corp. investment will increase investor confidence in Probursa, Vish said, helping the group tap international capital markets. It should also quell speculation that investors are paying too much for the banks being sold by the Mexican government.

Multibanco Mercantil, for example, sold for 2.7 times book value and 45% over its market value.

Ever since the Probursa purchase, the group’s executives have said they were seeking a foreign investor to provide technical assistance.

Mexican banking is outdated by international standards, the result of laws that prevent foreign competition in most financial services.

As new owners buy the 18 banks that were nationalized in 1982, they are trying to modernize quickly to meet competition anticipated under the North American free trade agreement now being negotiated by the United States, Canada and Mexico.