The Role Of Foreign Banks in Mexico

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The role that foreign banks play in Mexico has been increasingly important. They are now dominating more than 80% of the entire country’s banking assets. BBVA Bancomer, Banco Santander Mexico and HSBC Mexico are key foreign players involved in the banking industry in Mexico. (Alejandro, 2016)

These three banks are all subsidiaries owned by their parent banks that operate individually in Mexico. BBVA Bancomer operates as a fully owned subsidiary of Spanish BBVA group, Banco Santander Mexico is a subsidiary of Spanish bank Banco Santander, HSBC Mexico is a Subsidiary of bank HSBC Holdings plc. (BBVA, 2019) (Santander, 2019) (HSBC, 2019)

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In 1994, the financial crisis is Mexico generated a systematic failure in the country’s banking sector. After the collapse of domestic banks, the government opened doors to foreign banks to aid Mexico’s economic growth. Foreign banks saw opportunities in the immature banking sectors of Mexico and expanded their business rapidly into the country. BBVA, Santander and HSBC were successful banks that had already gained good reputations globally in the 90’s. These three banks could export their supervisory skills to Mexico and help to create an efficient operating framework in the country. In return, the local government promised strong support to facilitate these banks to expand into the country. (Alejandro, 2016)

The foreign banks would also be benefited from diversifying their sources of capital into other countries. Banking industry in the country of origin of these three banks are highly matured, profits are limited. Expanding into a country like Mexico could give them advantage to become one of the most dominant players in the country. Business cycles in countries are also different, expanding into a new country could further diversify the banks’ overall risks. Furthermore, the demand for credit in Mexico was high at that point of time. Large capital pool and low interest rate margins are attractive to domestic borrowers. These three banks were confident in screening potential borrowers while minimizing nonperforming loans. (Alejandro, 2016)

With more than 80% of the market share dominated by foreign banks, most domestic banks are struggling to survive in the competition. There is only one domestic bank that stands out and could compete with these well-known foreign banks. It is called Banorte, a subsidiary of Grupo Financierco Banorte, a leading banking and financial services holding company based in Mexico. (Banorte, 2019) All the four banks mentioned provides a full range of products and services to corporate and retail customers, government agencies and small to large enterprises. Products and services including deposit accounts, term deposits, full range of loans, credit cards, insurance, pension products, cash management, trade finance, advisory services, internet banking and more. (Orbis Bank Focus, 2019)

However, studies have shown that foreign banks are providing more credit for consumption and housing while neglecting commercial credit. Most of the commercial loans are still lent out by domestic banks as they have better access to soft information that is necessary to screen companies that are looking for capital to invest in profitable projects. (Orbis Bank Focus, 2019)

(Data obtained from Orbis Bank Focus)

(Data obtained from Orbis Bank Focus)

BBVA Bancomer is now the largest bank in Mexico in terms of total asset and net profit, it has a total asset of 1960 000 million Pesos and net income of 13200 million Pesos in 2018. The largest domestic bank in Mexico is Banorte and it has a total asset of 100 000 million Pesos and a net income of 5590 million Pesos as of 2018. Banorte is currently ranked the fourth largest bank overall in Mexico. The other two banks mentioned above, Banco Santander Mexico and HSBC Mexico are ranked number two and number five respectively.

(Orbis Bank Focus, 2019)

The “global advantage” hypotheses states the advantages that foreign banks have compared to domestic banks when entering into a new country or region. The “home field advantage” hypothesis states the advantage that a domestic bank has over foreign banks that are entering the home country. Both the theory suggests that banks have their own way and advantages to gain economies of scale, reducing risks and increasing profitability. They all have their own disadvantages as well. (Fadzlan, 2011)

“Home field advantage” theory states that domestic banks have advantages in terms of language, culture, regulatory structure and being familiar of the market environment. For example, Banorte was able to lend out the largest amount of commercial loans as it has more access to soft information of firms compared to foreign banks. With these soft informations, the bank could evaluate the credit worthiness of the borrowing firm more accurately. Whereas, foreign firms would be more conscious about the approval of these loans due to limited soft information. (Fadzlan, 2011)

“Global advantage” theory states that foreign banks have advantages such as the large pool of global clients, strong global reputation, large capital pool and mature management system. Banks such as BBVA, Santander and HSBC were able to enter and step firm in Mexico in a short period of time due to their high global reputation and large pool of international customers. The Mexican government encouraged these banks to enter into the country after the 1994 bank crisis. The foreign banks injected a huge amount of capital into the country and provided lower interest margins for borrowing. This aided the Mexican economy and also allowed these foreign banks to stand firm in the country. (Fadzlan, 2011)

Reference list

  1. Alejandro, S. (2016). Foreign Banks and Credit in Mexico,30, 77-93. Retrieved August 16, 2019, from
  2. Banorte. (n.d.). Retrieved August 16, 2019, from
  3. BBVA Mexico. (n.d.). Retrieved August 16, 2019, from
  4. Fadzlan, S. (2011). An Exploration into the Home Field, Global Advantage and Liability of Unfamiliarness Hypotheses in Multinational Banking,23(3), 163-176. Retrieved August 16, 2019, from
  5. HSBC Mexico. (n.d.). Retrieved from
  6. Orbis Bank Focus. (n.d.). Retrieved August 16, 2019, from
  7. Santander Mexico. (n.d.). Retrieved August 16, 2019, from

Total assets of the 4 banks in 2018 (million usd)

Total assets

BBVA Santander Banorte HSBC 1960000 1270000 1000000 625000

Net income of the 4 banks in 2018 (million usd)

Net income

BBVA Santander Banorte HSBC 13200 6070 5590 1170


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