In late September Spanish banking group Banco Santander successfully completed the IPO of close to 25 percent of its Mexican Unit, Santander Mexico. The Banco Santander listed shares of Santander Mexico in both New York and Mexico City, effectively raising more than $4.3 billion on a day when the world markets were mostly down.
Although the listing reflected a minority stake in Santander’s Mexico holdings, it is important to note that the Mexico market has been its most important for some time, generating nearly 10 percent of the bank’s total profits, despite the fact that the nation only accounts for around two percent of Santander’s total assets. In addition, although earnings in Banco Santander’s operations in Spain have been steadily falling, earnings from its Mexico unit have risen by nearly 14 percent.
Investing in Mexico real estate, as well as many other aspects of the nation’s economy is becoming increasingly attractive for banks and individuals around the world. According to Investing Daily, when Banco Santander had to raise cash quickly, the recent Santander Mexico IPO was the logical way to do it.
“The spin out is a tacit acknowledgement of Mexico’s economic status as an up-and-comer. Over the past two decades the country has successfully navigated a debt crisis of its own, redenominated most of its debt into pesos, licked inflation and ushered in a new era of impressive economic growth,” writes the organization’s analyst for emerging markets. “The night and day improvement in Mexico’s macro economy has allowed microeconomic ventures such as Santander Mexico to become hugely profitable enterprises.”
According to Banco Santander’s most recent disclosures, net income in Santander Mexico has risen by more than 18 percent in the first half of 2012 alone, reaching more than $720 million. Furthermore,Santander’s Mexico unit is expected to exceed this current growth rate over the coming months, causing analysts like those at Investing Daily to remain bullish on Mexico.