BBVA Sells Mexico Pension Fund to Banorte, IMSS for $1.6 Billion

Banco Bilbao Vizcaya Argentaria SA (BBVA) agreed to sell its Mexican pension fund to local buyers, including a state-owned agency, for $1.6 billion to raise capital and focus on its consumer-banking operation.

Grupo Financiero Banorte SAB and Mexico’s Social Security Institute, known as IMSS, will each pay half of the price for the Afore Bancomer unit, creating the nation’s largest pension fund, the companies said yesterday. The price will be adjusted based on the amount managed by the fund when the transaction closes, which may add $130 million to the deal, BBVA said.

Spanish banks are selling off assets as the government requires them to recognize more losses on real estate piled up on balance sheets during the country’s boom. BBVA had said it would consider selling pension funds in Chile, Colombia and Peru in addition to Mexico because there wasn’t a big enough overlap between those units and consumer banking in those countries.

The purchase will allow Afore XXI Banorte, the pension fund co-owned by the Banorte and the social-security agency, to cut costs and provide lower commission fees to clients, the Monterrey, Mexico-based bank said. The combined fund will manage 516 billion pesos ($39.6 billion) in assets and will have 11.8 million accounts, it said.

‘Very Positive’

“This is very positive for Banorte,” said Felipe Carvallo, an analyst with Moody’s Investors Service, in a phone interview yesterday. “However, we need to know how the bank plans to pay for its stake. I might get worried if they’re increasing their debt levels.”

Tonatiuh Rodriguez, chief executive officer for Afore XXI Banorte, declined to comment. Banorte and IMSS didn’t respond to interview requests.

Banorte cut total debt to 20.09 times earnings before interest and taxes in the third quarter from 23.87 at the end of 2011, according to data compiled by Bloomberg.

Banorte climbed 0.1 percent to 74.11 pesos yesterday in Mexico City before the deal was announced. Bilbao, Spain-based BBVA was little changed at 6.41 euros in Madrid.

BBVA’s pension-fund unit is currently the second-largest pension fund in Mexico, trailing the one run by Citigroup Inc.’s Banamex unit, according to the nation’s pension regulator. Afore XXI Banorte is fourth, following Grupo de Inversiones Suramericana SA. (GRUPOSUR)

The transaction is estimated to close in the first quarter of 2013 and will represent an after-tax gain of 800 million euros ($1.04 billion), BBVA said. The deal requires the approval of Mexico’s pension and antitrust regulators.

To contact the reporters on this story: Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net; Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Jose Enrique Arrioja at jarrioja@bloomberg.net

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