Trade may draw more foreign banks to Mexico

Mexico's position among Latin American markets may draw further foreign banks seeking to boost operations focused on import-export activity, Fitch Ratings said.

A number of banks have recently received regulatory approval to operate in Mexico. Several factors explain why an influx of lesser recognized foreign banks to Mexico could continue. In particular, the recently signed Trans-Pacific Partnership opens a wider degree of trade opportunities with Asian regions.

“We also expect Mexico will benefit from the U.S.'s decision in August to permit U.S. exporters to ship U.S. crude oil to the country - a step toward greater energy capacity, one key to more private investments,” the credit rating agency added.

Recent examples of banks coming from Asia include Industrial and Commercial Bank of China and Korean Shinhan Financial Group. Each gained recent regulatory approvals to operate Mexican subsidiaries.

Non-Asian regions could also be drawn into the mix, such as Brazil, which has generally shown limited interest in Mexico. Brokerage firm BTG Pactual and a newly created brokerage firm controlled by Itau Group have recently gained regulatory approvals.

Finally, Spanish bank Banco Popular was recently approved as a shareholder of a local bank (25% stake) and Banco Sabadell as a new bank in the system.

Other groups have entered the country with alternative financial vehicles and SPVs looking for geographic expansion and or diversification of funding through debt issuances in the local market. Spanish banks BBVA and Santander, Citigroup's Banamex, HSBC Mexico and Scotiabank of Bank of Nova Scotia are long-standing examples of foreign banks already diversifying into Mexico - each is counted among the seven largest banks in the country, or G7.

And many foreign banks already operate subsidiaries of global financial groups from various countries, including Spain, U.S., U.K., Canada, Switzerland, Japan, France and the Netherlands.

However, there have been also moves into the country resulting in later departures. RBS, ING Group, BNY Mellon, and most recently, Deutsch Bank each entered and later retreated as problems affecting each parent's overall operations contributed to exits.