International -- Finance: BANKING
ARGENTINE BANKING DRAWS A CROWD (int'l edition)
The economic rebound has foreign lenders grabbing stakes
Customers come and go quickly through Banco Itau's airy, sun-filled glass-and-chrome lobby in downtown Buenos Aires, staying just long enough to withdraw pesos or pay utility bills at automatic teller machines. The human tellers are on the second floor, a result of the Brazilian bank's emphasis on automation. Itau's cutting-edge technology and low fees have lured 30,000 customers to the 18 Buenos Aires area branches it has built in the past 16 months. It plans to open 18 more this year.
Itau is among the bevy of foreign banks zeroing in on Argentina as the economy rebounds from nearly two years of recession. In December, Spain's Banco Bilbao Vizcaya bought 30% of Banco Frances, Argentina's fifth-largest private bank, for $375 million. It joined Canada's Bank of Nova Scotia, Chile's Luksic group, and Mexico's Banamex, all of which have bought into Argentine lenders in recent years.
VAST MARKET. Why are so many bankers lusting after Argentine consumers? For one thing, Argentina is one of Latin America's most underbanked countries, with only 4,000 branches serving a population of 35 million. Argentina's lending business also has plenty of room to expand. The country's outstanding bank loans amount to only 22% of its gross domestic product, the lowest ratio among the region's major economies. With GDP expected to grow by over 5% this year, "suddenly, Argentina has gotten its sex appeal back," says Alejandro Reynal, chairman of Merchant Bankers Asociados, a local affiliate of Salomon Brothers Inc.
With Argentina's economy on the mend, analysts believe that businesses will start borrowing again in the first half of 1997 and consumers will follow. That's why Brian R. Pearl, senior Latin American bank analyst for J.P. Morgan & Co. in New York, expects top banks to boost their lending as much as 35% this year.
To compete for Argentine customers, who have $54 billion on deposit, many local banks and long-established foreign institutions are hustling. Bank of Boston has rolled out a family of mutual funds. And Citibank, which has emphasized deals with big corporations, is also expected to push harder into retail banking. Among the locals, Banco de Galicia, the country's largest privately owned bank, will spend $7.5 million this year to upgrade its remote-banking technology, including installing ATMs in supermarkets and appliance stores. No.2 Banco Rio de la Plata is redoing two-thirds of its 175 branches to create spacious ATM lobbies. Loan officers will be moved up front, and tellers will be pushed to the back. "Our move has been made much more difficult because of the evolution of Argentine banks," says Banco Itau Argentina President Antonio Carlos Barbosa de Oliveira. "They are catching up."
The race is claiming a growing number of victims. Since Mexico's 1994 currency collapse shook all of Latin America and spurred a flight of bank deposits from Argentina, the number of financial institutions has shrunk from 205 to 147. Argentines who kept their money in the country moved it out of smaller banks, and today, the 20 biggest lenders account for 75% of deposits.
SHAKEOUT. In five years, only 50 banks will be left, predicts analyst Malcolm Gibson of Roberts Capital Markets. With the pressure on, analysts believe that two leading lenders, Banco Roberts and Banco del Suquia, will take on foreign partners. In February, Bankers Trust New York Corp. bought 51% of Banco Liniers Sudamericano, a lender specializing in consumer credit. And analysts believe that Spain's Banco Santander, already a force in Latin investment banking, would like to buy control of an Argentine retail bank in 1998.
But for all their state-of-the-art technology and sunlit lobbies, foreign banks such as Itau are years from dominating Argentina. Some analysts even question how important automation will be as long as many Argentines say they still distrust ATMs. Meanwhile, lumbering state-owned banks control 40% of the Argentine market. But that's not deterring the foreigners. They see gold in Argentina--and they're prepared to fight for it.By Andrea Mandel-Campbell in Buenos AiresReturn to top