Mexico remains a country of interest for investment banking at a time when the segment is facing global difficulties due to the economic environment.
The country continues to be attractive for investment banking. However, for the next few years, it will depend on respecting private investment, respect for the rule of law and certainty in contracts.
commented Jorge Sánchez Tello, an independent private consultant.
For the director of economic analysis at Tec de Monterrey, Leticia Armenta, Mexico is a market that is growing and although there is a lack of financial culture, there are income levels among the population that are favorable for global investment banks.
Sánchez Tello considered that trends such as nearshoring could contribute to more global banks turning to Mexico or the participation of those that already have a presence in the country to grow, although he stressed the importance of an adequate framework of certainty for it to happen.
Movements at the local level
The footprint of global banks in Mexico has changed in recent years, and some participants have reduced their presence or suspended operations.
For example, in 2017, UBS Bank México closed operations and transferred them to UBS Casa de Bolsa, the following year it sold the representative shares of the bank’s capital stock to Afirme and in 2021 it was announced that it would also stop its brokerage activity in the country, preferring to operate from abroad.
In 2021, JP Morgan closed its representative office and the private banking business in national territory, after doing the same in Brazil, and referred its local clients to BBVA Mexico, although it maintained the operation of other businesses, such as bank investment or treasury services and even added staff in Latin America.
Credit Suisse also transferred its local private banking and asset management businesses to Actinver and although it has other operations, Standard & Poor’s considers that after its sale to UBS its days are numbered in the country “because the operation of the business in the country is no longer it is aligned with the long-term strategy of the group at a global level”.
For Jorge Sánchez Tello, these movements are rare cases that are mainly due to changes in the countries where the banks are based, as well as a small crisis in certain institutions at a global level that is giving rise to a reconfiguration.
Leticia Armenta pointed out that the changes are linked to both installation costs and the number of clients of these banks.
Sometimes the number of clients that you have is not enough, it does not justify the office you have, so they prefer to operate from other latitudes. Finally, today technology favors interested customers who are in contact from another location
Complicated imagen
2022 was a difficult year for investment banks, which saw significant falls due to the volatility in financial markets and the inflationary environment to which central banks responded with increases in reference rates.
The foregoing led to falls in the number of stock market debuts, which according to the consulting firm Ernst & Young fell 42% globally in 2022, as well as a slowdown in mergers and acquisitions.
This translated into lower fee income for investment banks. In the fourth quarter, the reduction for Goldman Sachs was 48% annually, while for Citi it was 58% and for JP Morgan it was 57%.
Some institutions reacted with personnel cuts that, according to Reuters, affected up to 6,000 positions, such as Goldman Sachs, which announced 3,000 layoffs, or Morgan Stanley, which eliminated nearly 1,600 positions.
