Argentina's banking system, rocked by a swift Spanish invasion in recent weeks, will never be the same. In early May, Banco Bilbao Vizcaya (BBV), an aggressive Spanish bank, capped a $750 million buying foray by acquiring Credito Argentino, the country's 10th-ranked bank, and merging it with the fifth-largest, Frances, which it had bought months earlier. A few weeks later, BBV's Spanish arch-rival, Banco Santander, struck back by laying out $694 million for a 35% stake in Ro de la Plata, Argentina's No.4 bank.
The incursions are just the latest skirmishes in a fierce Spanish banking rivalry that has spilled across the Atlantic. Spain's top banks "are in a war to the death," says Juan Ignacio Gimenez Echeverra, a top BBV executive in Argentina, "and we are going to bring that war here." The main contenders are Santander, Spain's biggest bank with $137 billion in assets, and BBV, No. 2 with $120 billion.
SMALLER STAKES. In a stunning acquisition spree, the two rivals have spent more than $5 billion since 1991, most of it in the past two years, to snap up stakes in more than a dozen banks throughout the region (table). Santander, which likes to take controlling stakes and remake the local banks in its own image, has spent more than $3.4 billion. BBV, which tends to take smaller stakes in market leaders, has laid out $1.6 billion and plans to spend $2 billion more.
Driving the Spaniards are falling margins at home and the lure of 20% returns on equity in some Latin countries. Throughout the region, their rivalry is shaking up banking--nowhere more dramatically than in Argentina. That country "will be an extreme example of what foreign presence does to a banking system," says Brian R. Pearl, senior Latin American bank analyst for J.P. Morgan & Co. in New York. He figures the number of banks in Argentina will drop from 112 to about 40 in the next five years.
In Peru and Chile, Santander has grabbed big chunks of the market by introducing long-term, low-interest home mortgages. And BBV's tactics, such as daily lotteries to attract new savings accounts, have forced homegrown banks to become more customer-friendly. In Mexico, BBV Probursa, now the country's sixth-largest bank, has attracted 350,000 new savings accounts and more than $125 million in deposits in the past 10 months with daily raffle giveaways of autos and Disney World vacations.
For Ana Patricia Botn, the head of Santander's investment arm, prices looked too high when Mexico privatized 18 banks in 1991 and 1992. But the 1994 peso collapse, by buffeting economies throughout the region, also "opened up a lot of opportunities, not just in Mexico," Botn says. Early this year, Santander paid $122 million for 55% of Banco Mexicano Somex after the Mexican government bought more than $3 billion of its bad debt. Immediately, Santander blanketed Mexico City buses and billboards with its own distinctive red logo. More than 6,000 salespeople hawked the bank's new private pension fund. And the renamed Santander Mexicano bank is competing against BBV with cash prizes for deposits.
The latest battlefront is Brazil. Santander agreed in March to spend $220 million for 51% of Banco Geral do Comercio, and BBV President Emilio Ybarra says he's shopping for a Brazilian bank. But Brazil will be a tougher market because its top-ranked banks are competitive and the country's size could require hundreds of costly branches.
The Spanish banks risk a drubbing if Latin economies hit the wall again. But with the region expected to grow at a 5% annual rate--double that of Europe--it's no wonder BBV and Santander are slugging it out in the land of El Dorado.