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Mexico Best Investment Bank: Banamex

Nov 1, 2012

If Mexico is truly the place to be in Latin America in the next few years, there will be no shortage of investment banking and capital markets opportunities. So far this year there have already been signs of increased equity and debt capital markets activity.

This will mean greater competition for the largest banks, particularly Banamex, which has again shown itself able to offer the widest range of options for Mexican clients.

³In the last year we¹ve seen tremendous activity compared to what we had two or three years ago,² says José Antonio González, Citi¹s head of global banking for Mexico. (Citi bought the Banamex Financial Group in 2001.) Mexico benefited from a strong banking sector during the 2008-2009 crisis and has built on that. So, with Mexico¹s GDP growing at around 4% annually ‹ at a faster pace than Brazil ‹ it is ready with a full slate of services for the uptick in activity.

Citi and Banamex led the league tables in total DCM volume for Mexican issuers, counting both domestic market and cross-border transactions, with $5.43 billion. This year, the bank lead managed a $2 billion 2044 note for the Mexican sovereign and a ¥80 billion ($1 billion) three and five-year Samurai that was the first from the region without a Japan Bank for International Cooperation guarantee.

Citi also brought large offerings to the international buy-side from corporate issuers including the CFE, Bimbo and Pemex.

Mexico¹s local debt capital market has remained active while many of the region¹s other local markets have only seen sporadic activity. With some $70 billion pesos issued ‹ year to date (through late September), González says around $130 billion pesos could be issued in 2012 ‹ this is up from around M$100 billion pesos last year.

Banamex, headed up by chief executive Enrique Zorilla, booked just over $2 billion-equivalent in domestic bond transactions over the past twelve months. Large transactions on the local side have included a $7 billion peso

2015 and 2021 bond sale from government development bank Banobras, deals from corporate heavyweights Mexichem and Grupo Carso, and a $4 billion peso sale from retailer Liverpool.

³In the local market we¹ve seen spread tightening,² says González . ³Issuers have taken advantage of lower rates. Everyone is still bullish on rates. The macroeconomic conditions of the country are favorable. It is a dream come true for an economist and certainly also for an investment banker.² He says the Afores (pension funds) are still liquid and there should be little in the way of inflationary pressure. He foresees a pickup in specialized deals in the local market, with real estate transactions and auto loan securitizations likely to appear more frequently in 2013.

More recently, the bank handled more than $2 billion in debt and equity transactions for Mexichem, following M&A work that occurred during the awards period. Mexicans buying abroad ­ América Móvil has been another notable example ­ is a theme that has many banks eager to generate business in several product areas.

³I expect a process of internationalization of Mexican companies,² says González. ³In the next three years we will see Mexican companies taking advantage of different valuations, mainly in Europe. If these companies explore international expansion they will have access to capital² South America is also a destination for acquisitive Mexican comapnies, says González. Citi-Banamex advised on more than $5.7 billion in M&A deals involving Mexican corporations in the twelve months to the end of August, the second-highest total.

Banamex¹s $374 million Mexican ECM volume made it a leader for the period though historically this figure is not exceptional.

Later in 2012, however, the fortunes for new issuance looked set to pick up, spurred by deals including Santander Mexico¹s $4 billion IPO. Bankers expect more opportunities for small and mid-size Mexican issuers.

³We have a number of new issuers,² González says. ³There is visible supply getting prepared.² LF

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