If you ever wonder why Banamex, the No. 2 bank in Mexico, is so key to the fate of parent company Citigroup, I can explain.
In recent years, Banamex has been the source of anywhere between 11 and 15 percent of the global profits of Citigroup. Why? Because Banamex nicks clients with fees far higher than the global average.
My wife and I recently miscalculated and I wrote a check with insufficient funds on our Banamex account. The bank has been unable to provide me with a monthly statement since last August but they very quickly sent a note about the charges I had incurred for the overdraft: 642.72 pesos. That is more than $50.
According to this website, overdraft fees in the United States range from $10 to $38, with a median fee of $27.
Of course, Banamex is not alone in charging Mexicans far more than prevailing global rates. Look at cellular phone and cable TV rates, airfares from Aeromexico, or any of a range of services offered by companies with a strong market share. In Mexico’s sclerotic political system, politicians gain more by favoring powerful companies than average people.
I can vouch under my anonymous that Banamex is indeed very important to Citi but never knew why until now. It makes sense Citi would not be disclosing this information freely.
Posted by: Citizen57 | 03/28/2012 at 09:52 PM
We DO have credit unions (Cajas de Ahorros) but the reason Banamex is a profit center for Citibank is that Mexican banking laws were reformed in the 1990s after the peso collapse making them safer than U.S. banks. Credit is tight, and fees are high, but they have much higher capital reserve requirements and, if they are in danger of failure, can be forcibly sold right down to the office fixtures or merged by the CNBV (the Mexican banking and stock regulatory agency). Banamex was in an odd position, after the U.S. bailout, which made its parent company's ownership by a foreign government higher than Mexican regulations allow... which took some fancy 'splain by Augustin Carstens to avoid forcing its sale (and which would have made the U.S. crisis even worse).
Posted by: Richard Grabman | 03/19/2012 at 03:36 PM
Someone needs to introduce credit unions into Mexico.
Posted by: RandyT | 03/16/2012 at 11:43 PM