Market Awaits Credito Real IPO

Mexico’s Credito Real had yet to price an IPO targeting MXP2.8bn ($230m) late Tuesday. The specialist lender is offering 116m shares, assuming a 15% greenshoe, at MXP22.00-MXP26.00 each, meaning a MXP2.78bn transaction if done at the midpoint. About 73% of the deal is planned to be primary shares, with the remainder secondary shares to be sold by investors including Nexxus Capital – the largest holder with 18.3% – and Grupo Kon. Credito Real was aiming to place half the deal in Mexico and half internationally, through this was subject to demand. The bank was aiming to place half the deal in Mexico and half internationally, though this could vary along with demand. Analysts see the price range as suggesting a multiple of 2.5x-2.7x book value, compared to the 3.5x seen by microfinance lender Banco Compartamos. “Credito real operates in a segment that is underpenetrated, like all segments of banking in Mexico. It is also an area that sees high profitability and low levels of non-performing loans,” says a Mexico City-based equity analyst. He identifies some risk in Credito Real’s loan coverage provisions, which could be higher, but notes that payroll-deduction and the other types of lending Credito Real engages in are generally considered safe. Banking in Mexico is also set to continue growing around twice as fast as GDP. Proceeds are for general corporate purposes and for expansion plans. Deutsche Bank and Barclays are managing the international portion, joined by Banorte-Ixe on the domestic tranche. Targeting Mexico’s underbanked lower and middle classes, Credito Real grew by 63% during 2009-2011, and booked revenue of MXP1.0bn in the 12 months to June 30. Founded in 1993, it has funded itself through investment such as Nexxus’, in 2007, and in the local debt markets. Last year it acquired payroll lender Credifel.