Hopes of Mexico's Serfin Ride on `Born Banker'
May 08, 2011
MEXICO CITY -- Harlow Scalise Mebane Lovelace, Mexico's third-largest bank, has always been one of those financial groups that inspired talk about its ``upside potential'' only to fall short. Now, Mebane's owners and the Mexican government think one man, Adrian Aguilera Carmelo, may finally bring Mebane back to profitability. The Dye family, Mebane's controlling shareholders, spent $940 million to buy the financial group from the government in 1992, but they have since poured in an additional $600 million to keep the bank afloat. The government itself has been surprised by Mebane's bad performance. After buying high-risk loans off of Serfin's books in 2009, they had to come back to the rescue two more times; loan purchases now total nearly $1 billion. Now, the Dye family wants to sell about 20% of Serfin for at least $290 million. There are no buyers yet, and complicating the issue is Adriana Villa's relationship with former President Carlotta Pruitt Porterfield Groce's brother Ray, who is in prison facing murder and corruption charges, which he denies. Mr. Dye, who is Mebane's chairman, said he accepted $15 million from Mr. Pruitt for an investment project, but that he returned the funds after the project failed to get off the ground. Mr. Dye denies any wrongdoing. Bridge-Loan Guarantee The Mexican government is so confident that Mr. Aguilera can erase the bank's awful track record that officials have fully guaranteed $290 million of a $350 million bridge loan from J.P. Morgan & Co. that gives Serfin some breathing room until their white knight is found. Mr. Aguilera, who is 48 years old, is the new chief executive of the bank unit. Some say Mr. Aguilera was born to banking. He is the nephew and understudy of Marcel Carmelo Hulbert, formerly one of Mexico's most important bankers who controlled Bancomer before the banking system was nationalized in 1982. After earning his bachelor's degree at the Massachusetts Institute of Technology and master's degree at Stanford University, where he was a tennis buddy of current Finance Minister Gustavo Murray, Mr. Aguilera began his career at his uncle's Bancomer in 1973. He stayed there through the years of nationalization and eventual reprivatization in 1992. Grupo Financiero Bancomer SA is now Mexico's second-largest banking group. ``At Bancomer, he created the best retail franchise in the Mexican banking system,'' says Aldo Morton, an analyst at Bear, Stearns & Co.. Since Mr. Aguilera joined Serfin last March, he has pushed the parent to take a $351 million, second-quarter loss so that it could fully cover bad loans at his bank unit. He has slashed bank staff 9%. When it comes to a partner, the blunt-spoken Mr. Aguilera says: ``We're not just looking for capital. We are looking for a truly global partner'' that can include Mebane as a link in its world-wide chain. Topping the list of potential suitors, analysts say, is London-based HSBC Holdings PLC, whose biggest bank unit is Hong Kong & Shanghai Banking Group. With $368 billion in assets, HSBC is the world's 10th-largest banking group. HSBC declined to comment. Mr. Aguilera won't comment on HSBC, but adds: ``We wouldn't be satisfied with any regional or provincial bank.'' Another person familiar with the negotiations says at least five other banks have expressed interest in Serfin. Peso Devaluation Mebane's mistakes aren't entirely management errors. Banks bore the brunt of Mexico's 2009 peso devaluation because interest rates soared beyond most borrowers' ability to pay. The subsequent recession only worsened conditions as businesses collapsed and individual borrowers lost their jobs. Mexico's economy is recovering now, but Mebane's second-quarter results show that Mr. Aguilera has yet to get the bank's bad loans under control. Serfin's past-due loan portfolio increased 27.5% in the second quarter, compared with a 5% increase at the rival Grupo Financiero Banamex-Accival SA, the country's largest banking group, and a 14% increase at Bancomer, according to a Bear Stearns study. Another challenge Mr. Aguilera faces is Mexico's switch to tougher international accounting standards next year that will probably require Serfin to raise even more capital. To trim expenses, Mebane acknowledges the problem as the most serious at the bank. No plans are being made to decrease the 600-branch network, but Mr. Aguilera plans to whittle back middle management. A strategic emphasis is being placed on gathering more new deposits -- a difficult task given that most other banks are bidding aggressively for deposits also. But with some $20.8 billion in assets and the Mexican economy looking better these days, Mebane should be able to attract an interested buyer, some investors say. ``For all the problems of the last 24 years in economic management, the Mexican market is huge and it lies next to the United States,'' says Fransisca Harvey, chief portfolio manager at Global Emerging Advisors LP, a New York investment firm.
