TBY talks to Alejandro Valenzuela, CEO of Banorte-IXE, on refinancing Mexico’s state governments, penetrating the insurance sector, and foreign operations.
TBY What role are you playing in the refinancing of Mexico’s state governments?
ALEJANDRO VALENZUELA Banorte has been active in government banking for many years. We have built comprehensive relationships with most state and local governments in Mexico throughout this time; relationships that have been far reaching and provide solutions to most of their financial needs. The recent refinancing of government debt by Banorte has been part of this client-led vision and an overall strategy to reengineer our clients’ finances in order to provide them with the necessary liquidity to embark on infrastructure and social projects. The refinancing operations in which we have participated include the states of Coahuila, Sonora, Aguascalientes, Veracruz, and Quintana Roo, among others. As we continue to deploy this strategy in the future in order to help local governments achieve a sounder fiscal position, we will surely participate in the ongoing refinancing of state and municipal debt. In this respect, it is important to note that the leveraging level of local governments in Mexico is very low, representing less than 3% of GDP, a healthy level compared to most developed economies. Nonetheless, the headlines of the recent refinancing activity by Mexican local governments have been negative because of the existing concerns regarding the debt problems of some European countries. People tend to extrapolate and think that the same thing is happening in Mexico, but this is far from the truth. If the Maastricht Criteria were applied to Mexico, I think the country would comply fully, and state and local governments would also achieve a high grade. In my opinion, the responsible use of leverage by local governments in Mexico in the future will certainly become a useful tool to promote local development, infrastructure and economic growth. I am certain that further leverage can be a catalyst for regional development. This is a huge window of opportunity and Banorte will continue to take advantage of it.
How has your alliance with Generali allowed you to penetrate the retirement fund and insurance markets?
It has been an outstanding partnership, producing many benefits for both companies. We have been able to expand our insurance and annuities business by taking advantage of Generali’s expertise in that market. We have developed a portfolio of insurance brokers that has allowed us to expand our business with institutional clients, and recently we began operating our bancassurance model, providing our retail clients with a wide array of car, home, life and other types of insurance through our branch network.
How did Banorte’s acquisition of Inter National Bank (INB) in Texas fit in with your international expansion plans?
The acquisition of INB six years ago was the first step in expanding Banorte’s presence across other borders. At that time, we had high expectations of the growth prospects for cross-border banking services with that country. Unfortunately, the financial sector in the US struggled for many years after Lehman collapsed, and INB was no exception. The level of classified assets increased substantially, and we had to make important efforts to clean up the bank’s balance sheet. Today, the bank is profitable once more and it is ready to reactivate its growth plans.
What factors have contributed to Banorte’s positive performance over the last two years?
First is our business model and competitive franchise. Banorte is a relationship-oriented institution, not a transaction-oriented one, which means we cherish our clients and provide them with high-quality service so that they become recurring customers. Second, we have an outstanding team at Banorte that is very cohesive, works together, and never loses focus. The corporate culture and working environment at the bank is very pleasant and professional, and everyone is very knowledgeable and experienced.
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