Mexican banks invest domestically

Banco Interacciones has a long history of working with its country’s governments in order to help develop infrastructure. With a new leadership inbound, that is set to continue

Banco Interacciones has a long history of working with its country’s governments in order to help develop infrastructure. With a new leadership inbound, that is set to continue

For the past few decades, financial services in Mexico have been growing steadily. With better-regulated markets, increased competition, and more transparency in the banking system, more people have been integrated into the financial system. However, many people are still left out of major credit and savings options. This situation is also true for many municipalities and states. Even though this market segment has great potential, most local projects and investments tend to be funded with local resources. As a result, domestic credit to subnational entities is pretty low, accounting for only 2.7 percent of Mexico’s GDP.

With many state governments steadily increasing their spending in infrastructure projects, improvements to existing facilities, and so on, funding needs have arisen in the past few years. Under these circumstances, Banco Interacciones is an important partner for several Mexican government entities, helping them face and satisfy their credit needs.

Worldwide, the economy has stalled. At the beginning of 2011 there was hope for a gradual recovery; however, a couple of unexpected events did not allow some expectations to be fulfilled: a downgrade to the ratings of the US, and a worsening of the financial situation in many European countries; factors that have had a great impact in many countries around the world.

Nonetheless, the Mexican economy has been stable for the last few years, with inflation under control, low interest rates and an increasing GDP. By the end of 2012, new challenges will arise when a new government takes office. This new government has already expressed its intention to develop a new infrastructure plan for the next six years, aiming to improve the life of the Mexican population. In this concept, Banco Interacciones committed to provide every single Mexican government with a viable solution to its credit, investing and risk management needs. With plans to execute many public-works projects all across the Mexican territory, the country will be an interesting investment option for the foreseeable future.

Flexible and specialised
As a result of its expertise in the structuring of infrastructure projects, financial advisory and project finance consultancy, Banco Interacciones is an ideal partner for international firms interested in investing in Mexican public infrastructure. Clients’ needs can be met thanks to Banco Interacciones’ distinctive approach to business: through a flexible strategy (the bank does not provide a standard product; it has the ability to offer custom-made services), as well as through its short time to market in assisting with financial solutions for its clients.

Following a clearly defined strategy, the bank has been a major player in the market segments that demand a high degree of specialisation in designing flexible financing mechanisms. A respected institution among its target market, the bank plays a major role in the public sector financing business, lending to the three government levels: federal, state, and municipal; as well as state-owned firms and other public companies. Banco Interacciones continues to follow its current strategy, supporting governments and related companies, and participating in eligible infrastructure projects. The bank supports different kinds of projects that can help it grow – be it organically or inorganically – all inside the guidelines set by its own strategy.

It has always been concerned with solving its customers’ needs by listening carefully to them, in order to develop a high quality tailor made solution. Banco Interacciones has proven to be an important asset for many Mexican governments, helping them with financial solutions, which in turn have allowed for improvements to be made in the country’s infrastructure.

Providing infrastructure support
Formed by an experienced and professional team, the bank has been an integral part of how Mexican governments have financed their credit needs for the past two decades.

These financing activities have reached a historic level so far in 2012; the bank has financed 20 Mexican States, as well as 55 municipalities, lending money for the construction of a range of public infrastructure projects such as schools, roads and highways, hospitals, water treatment plants, waste management facilities, power generation plants and prisons, among others.

As an expert in the infrastructure business, Banco Interacciones has been an important player for some time, helping and developing tight relationships with subnational entities.

Even though the market is now full of capable and well-recognised competitors, the bank has been able to stand out among them thanks to a distinct approach; being flexible and adaptable has allowed it to understand the needs of its clients and, as a result, offer services and products that totally fulfil those needs. Banco Interacciones was founded by Mexicans who were in touch with the governments of the day, and its current management team are experts in the way business is handled in this sector.

In the last decade, the bank has seen an accelerated growth rate in its total assets and credit loan portfolio, as well as in its net income; however, the bank has never lost sight of its core competencies, staying away from risky businesses where it has no expertise, and being conservative, as well as avoiding unnecessary risks. At the same time, Banco Interacciones has helped its clients, through financial advice, to understand how useful is to plan ahead and be backed by a serious institution.

Building on success
In the past few years, the bank has accomplished important results, as measured by profitability, capitalisation, loan portfolio size, minimum rates of default, and other metrics, which have placed Banco Interacciones among the market leaders in each of these categories, ranging on average from third to first place.

The bank’s results for the first half of 2012 placed its key performance indicators at record levels, reaching a financial income of $199m; an operating income of $56m, as well as a net income of $31m; reaching a credit loan portfolio of $3.5bn, while maintaining high-quality standards in its default rates. Given the operations and credits already granted, Banco Interacciones’ numbers have been in keeping with expectations. Despite the great results the bank has obtained, Banco Interacciones is aware of the constant challenges that a global economy presents and is therefore always on the lookout for new opportunities that emerge in the financial markets.

Once again, Banco Interacciones has shown consistent and very low volatility results given the adverse financial and economic scenario companies and financial intermediaries are facing. The outlook for the bank is very promising given the fact that the institution fully adheres to its low risk business model, which is also responsible for its excellent financial performance in the past decade.

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