BUENOS AIRES - A spree of takeovers of Argentine banks by foreign entities has changed the landscape of the local financial sector dramatically and significantly altered the ownership structure of the three top pension funds - Maxima, Siembra and Consolidar.
Control of the three Administradoras de Fondos de Jubiliaciones y Pensiones, which were managing more than 47% of the $6.59 billion in system assets at the end of April, was affected by the May purchases of local entities Banco Rmo, Banco de Cridito Argentino, and Banco Roberts. The sales, to Grupo Santander, Banco Bilbao Vizcaya and Hong Kong & Shanghai Bank Corp., respectively, left only one local private bank - Banco de Galicia - in the ranking of the 10 largest financial entities in the country.
The flurry of bank purchases was attributed to the stability in the Argentine economy that has created new markets for loans, leasing, mortgages, mutual funds, credit cards and low-fee savings accounts, as well as the need for capital by local banks to be able to compete throughout the country in all of these areas. Meanwhile, government plans calling for the creation of direct-deposit accounts for all employees has led increased prospects for the "bankerization" of the population.
Citibank's ownership of 49% of Siembra was complicated by Santander's purchase of majority control of Banco Rmo, the indirect holder of 51% of the AFJP. For some days following the completion of the Santander-Rmo deal, the legality of Santander's simultaneous ownership of two AFJPs was questioned, given that it holds 49% of Ormgenes, the fourth largest AFJP, in a partnership with the public Banco de la Provincia de Buenos Aires. But Santander officials have made it clear they plan to maintain the current affiliation - which carried with it invaluable lobbying privileges -and sell Rmo's stake in Siembra for a price estimated at $200 million to $250 million. Citibank's dilemma now is whether to bring in a new partner in Siembra or buy up the outstanding Siembra shares and burn up capital that could be used for a bank purchase.
Almost by default, family-owned Galicia is rumored to be the takeover target of Citibank, which has publicly stated its commitment to expand distribution throughout the country but has seen potential targets snapped up in a matter of weeks. Galicia began 1997 as the largest private bank in the country with $3.34 billion in deposits.
The two banks seem right for each other not just because they are the last two major entities on the dance floor that have yet to pair up. Galicia has been relegated to a minority role in AFJP Consolidar, following Banco de Cridito's purchase by Banco Bilbao Vizcaya. Banco de Cridito and BBV's other Argentine holding, Banco Francis, are each 33.3% partners of Consolidar, meaning BBV will have 66.6% control of Consolidar. This has led to suggestions Galicia will drop its ties to the AFJP and buy up the Siembra stake Santander wants to cede, facilitating a deeper relationship with Citibank.
When the Hong Kong & Shanghai Bank went from minority shareholder to owner of Banco Roberts, it became the instant holder of 35% of Maxima, whose remaining partners are Deutsche Bank, Banco Quilmes, the IFC, and New York Life. However, New York Life, a Roberts joint-venture partner that provides life insurance coverage to Maxima affiliates, has indicated its intentions to not participate further in the management of the AFJP and likely will sell its 17% stake. The sale to HSBC would give it outright control of Maxima.
The stakes in the pension fund industry are getting higher by the minute, with the top six funds controlling 80% of industry assets with none of the remaining 14 funds managing more than 4% of the total.
Consolidar is the largest, with $1.11 billion in assets and 484,500 non-delinquent affiliates. Maxima is the second largest, with $1.07 billion in assets and 845,600 affiliates. Next is Siembra, with $946.82 million and 402,200 affiliates. The system's 3 million non-delinquent affiliates (there are some 2.6 million other affiliates who are registered to a fund but not making contributions) are adding just less than $300 million per month to the AFJP system.
