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Banco Internacional (BITAL). Mauricio Almagro Darika Amornvatana Larry Hou Shilpa Lulkarni Juan Carlos Mier y Teran February 26, 1999. Agenda. Grupo BITAL Risk Analysis Valuation before the Crisis Questions and Discussions Post Crisis Valuation Epilogue. Mexican Banking System.

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Presentation Transcript
Banco internacional bital l.jpg
Banco Internacional (BITAL)

Mauricio Almagro

Darika Amornvatana

Larry Hou

Shilpa Lulkarni

Juan Carlos Mier y Teran

February 26, 1999


Agenda l.jpg
Agenda

  • Grupo BITAL

  • Risk Analysis

  • Valuation before the Crisis

  • Questions and Discussions

  • Post Crisis Valuation

  • Epilogue


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Mexican Banking System

  • Changes in the industry

    • Nationalization

    • Consolidation

    • Re-privatization

  • Regulatory practices

    • Conglomerates

    • Foreign investment

  • Loans growth

    • Credit analysis

    • Funding


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BITAL

  • Group

    • Grupo Prime

    • Banco Internacional

  • Integrated Financial Services

    • Distribution channels

    • Subsidiaries

  • Strategy

    • Market coverage (growth)

    • Segments

    • New image



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The Crisis

  • Before

    • Exchange rate control

    • Capital inflows

    • Reserves

    • Political events

  • After

    • Devaluation

    • Investor confidence (local, foreign)

    • High interest rates


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Agenda

  • Grupo BITAL

  • Risk Analysis

  • Valuation before the Crisis

  • Questions and Discussions

  • Post Crisis Valuation

  • Epilogue


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Risk Analysis

Country Risk

  • Currency devaluation & economic forecasts.

  • Income inequality

  • Social insecurity

  • Political Stability


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Risk Analysis

Business Risk

  • Openness in the industry

  • Quality of loan portfolio

  • Non-performing loans


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Agenda

  • Grupo BITAL

  • Risk Analysis

  • Valuation before the Crisis

  • Questions and Discussions

  • Post Crisis Valuation

  • Epilogue


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Pre Crisis Valuation

  • Interest Income

  • 20% growth in the first 3 years,

  • 15% growth 4-6 years

  • 10% growth 7-10 years.

  • Interest Expenses

  • 65% of interest income

  • Personal Expenses

  • 2% of total assets

  • Recruiting of more educated personnel.


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Pre Crisis Valuation

  • Administrative & Operational Expenses

  • 1.5% of total assets

  • Increased due to expansion plans.

  • Loan Portfolio

  • 20% growth in the first 3 years,

  • 15% growth 4-6 years

  • 10% growth 7-10 years.

  • Terminal Growth

  • 10% growth (assuming 7% inflation rate)


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Pre Crisis Valuation

  • Cost of Equity 36.5%

  • ICCRC 46.1

  • Cost of Debt 15.3%

  • Average Inter-bank interest rate in 1994

  • D/V 41%

  • WACC 27.7%

Value of BITAL N$17.90 per share.


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Agenda

  • Grupo BITAL

  • Risk Analysis

  • Valuation before the Crisis

  • Questions and Discussions

  • Post Crisis Valuation

  • Epilogue



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Agenda

  • Grupo BITAL

  • Risk Analysis

  • Valuation before the Crisis

  • Questions and Discussions

  • Post Crisis Valuation

  • Epilogue


Post crisis valuation l.jpg
Post Crisis Valuation

  • Interest Income

  • -10% growth in the first year,

  • -5% growth in 2nd year.

  • 10% growth in 3-4 years

  • 15% growth 5-7 years.

  • 10% growth in 8-10 years

  • Interest Expenses

  • 65% of interest income

  • Personal Expenses

  • 1.6% of total assets


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Post Crisis Valuation

  • Administrative & Operational Expenses

  • 1.4% of total assets

  • Loan Portfolio

  • 5% growth in the first 2 years,

  • 10% growth 3-5 years

  • 15% growth 6-10 years.

  • Terminal Growth

  • 10% growth (assuming 7% inflation rate)

  • Write-offs (as a % of past-due loans)

  • 20% in first 2 years

  • 15% in years 3-4

  • 10% in years 5-7

  • 4% in years 8-10


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Post Crisis Valuation

  • Cost of Equity 59.71% to 32.89%

  • ICCRC 41.8 to 46.9

  • Cost of Debt 36.7% to 12%

  • Average Inter-bank interest rate

  • D/V 34%

  • WACC 54% to 27%

Value of BITAL N$9.63 per share.

46% decrease



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Agenda

  • Grupo BITAL

  • Risk Analysis

  • Valuation before the Crisis

  • Questions and Discussions

  • Post Crisis Valuation

  • Epilogue


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What Happened Next?

  • BITAL restructured its loan portfolio

  • Completed capitalization program in 1996

  • Rapid expansion of branch network

  • Ranked the fourth largest bank after the recent merger


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