MP News Staff
Wal-Mart Bank in Mexico Undercuts BBVA, Citigroup
By Adriana Arai
(Bloomberg) — Wal-Mart Stores Inc., the world’s largest retailer, made its first foray into banking, opening branches in Mexico and undercutting fees at the biggest local lenders, Banco Bilbao Vizcaya Argentaria SA and Citigroup Inc.
Wal-Mart de Mexico SAB is offering free interest-bearing accounts with unlimited cash withdrawals at its stores for a minimum deposit of 50 pesos ($4.57), according to employees at one of the company’s four branches, which opened Nov. 7. It’s also offering loans of as much as 50,000 pesos for in-store purchases.
The Mexican subsidiary of the Bentonville, Arkansas-based retailer plans to open 75 branches by the end of next year to take deposits from millions of Mexicans who don’t have bank accounts. Mexican authorities signed off on the plan last month, after Wal-Mart abandoned plans to open its own bank in the U.S. The company withdrew it U.S. bank license application in March, after meeting opposition from the banking industry.
“Many people in Mexico don’t approach a bank because there’s a perception that financial services are expensive,” Angelica Bala, a banking analyst with Standard & Poor’s in Mexico City said. “There’s a huge potential market for Wal- Mart.”
In 2006, the FDIC, a Washington-based agency that insures deposits at U.S. banks and regulates industrial banks, imposed a freeze on applications from commercial companies, including Wal- Mart, to give Congress time to weigh in. The U.S. House of Representatives passed a bill in May that would bar new industrial banks owned by non-financial firms. The Senate has yet to act.
Wal-Mart de Mexico Chief Executive Officer Eduardo Solorzano will meet with analysts in Mexico City tomorrow to provide details of its banking operations. Wal-Mart de Mexico is two-thirds owned by its U.S. parent.
BBVA’s Bancomer unit charges an annual fee of 109 pesos plus tax on its flagship savings account, El Libreton, and requires a minimum balance of 3,000 pesos to pay interest, according to its Web site. Citigroup’s Banamex unit charges a flat monthly fee of 30 pesos on its Cuenta Perfiles account, or per-transaction levies, and requires a balance of at least 1,000 pesos to pay interest, according to the company.
Wal-Mart de Mexico will open a bank branch in all stores and restaurants with the space to accommodate them, Solorzano said in an Oct. 2 interview. Wal-Mart runs 980 stores and restaurants in Mexico.
Three of the new Banco Wal-Mart branches are open to the public in Toluca, an industrial hub about 70 kilometers from Mexico City. The fourth serves employees and suppliers at the retailer’s headquarters in Mexico City.
Inside one of the Toluca stores, on Paseo Tollocan, the new bank branch is sandwiched between an eyeglass retailer and restrooms in a row of small storefronts just beyond the checkout lanes. It employs two tellers and three account executives who share a single long desk. The slogan outside the branch reads, “As easy as going to the supermarket.”
Daniel Garcia, one of the executives, approached shoppers Nov. 9 as they wheeled their carts from the checkout lines past the bank. “Do you know Banco Wal-Mart?” he asked. “We’re a new financial institution that isn’t the fruit of partnerships, mergers or acquisitions. We’re totally independent. We’re backed by Wal-Mart.”
One interested customer was Erick Adan Rojas, 28, a cab driver and father of one, who said he makes about 2,000 pesos per week and needed credit to furnish his rented house in the working-class neighborhood of Coacalco, in Mexico City.
Taking Market Share
Banamex rejected his application for a credit card and BBVA Bancomer demanded “too many documents,” Rojas said.
Garcia said Banco Wal-Mart would need about two days to talk to Rojas’s neighbors before approving his loan because he can’t provide proof of his income.
“For every 1,000 pesos in credit, you will have to pay 1,433 pesos back in a year,” Garcia told Rojas. He added that Banco Wal-Mart, unlike other lenders, doesn’t charge any penalty fees if the loan is paid ahead of schedule.
Solorzano said in an Oct. 2 interview that Wal-Mart market surveys showed that about 80 percent of clients don’t have a bank account. Banco Wal-Mart Chief Executive Officer Julio Bosco Gomez, a former Bank One Corp. executive, said in a statement today the bank will eventually offer services to small companies.
“Wal-Mart will take some market share from the traditional banks,” said Alejandro Garcia, who covers Mexican and Central American banks for Fitch Ratings Inc. in Monterrey, Mexico. “In the low-income segment, the competition will be among equals.”
BBVA Bancomer declined to comment. Jose Ortiz-Izquierdo, a spokesman for Banamex in Mexico City, wasn’t available for comment, according to his office.
Wal-Mart de Mexico fell 2.3 percent today in Mexico City trading, widening this year’s losses to 20 percent. The benchmark stock index in Mexico is up 6.6 percent this year.