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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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banco internacional bital
Banco Internacional (BITAL)

Mauricio Almagro

Darika Amornvatana

Larry Hou

Shilpa Lulkarni

Juan Carlos Mier y Teran

February 26, 1999

agenda
Agenda
  • Grupo BITAL
  • Risk Analysis
  • Valuation before the Crisis
  • Questions and Discussions
  • Post Crisis Valuation
  • Epilogue
mexican banking system
Mexican Banking System
  • Changes in the industry
    • Nationalization
    • Consolidation
    • Re-privatization
  • Regulatory practices
    • Conglomerates
    • Foreign investment
  • Loans growth
    • Credit analysis
    • Funding
bital
BITAL
  • Group
    • Grupo Prime
    • Banco Internacional
  • Integrated Financial Services
    • Distribution channels
    • Subsidiaries
  • Strategy
    • Market coverage (growth)
    • Segments
    • New image
the crisis
The Crisis
  • Before
    • Exchange rate control
    • Capital inflows
    • Reserves
    • Political events
  • After
    • Devaluation
    • Investor confidence (local, foreign)
    • High interest rates
agenda7
Agenda
  • Grupo BITAL
  • Risk Analysis
  • Valuation before the Crisis
  • Questions and Discussions
  • Post Crisis Valuation
  • Epilogue
slide8
Risk Analysis

Country Risk

  • Currency devaluation & economic forecasts.
  • Income inequality
  • Social insecurity
  • Political Stability
slide9
Risk Analysis

Business Risk

  • Openness in the industry
  • Quality of loan portfolio
  • Non-performing loans
agenda10
Agenda
  • Grupo BITAL
  • Risk Analysis
  • Valuation before the Crisis
  • Questions and Discussions
  • Post Crisis Valuation
  • Epilogue
pre crisis valuation
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.
pre crisis valuation12
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)
pre crisis valuation13
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.

agenda14
Agenda
  • Grupo BITAL
  • Risk Analysis
  • Valuation before the Crisis
  • Questions and Discussions
  • Post Crisis Valuation
  • Epilogue
agenda16
Agenda
  • Grupo BITAL
  • Risk Analysis
  • Valuation before the Crisis
  • Questions and Discussions
  • Post Crisis Valuation
  • Epilogue
post crisis valuation
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
post crisis valuation18
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
post crisis valuation19
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

agenda21
Agenda
  • Grupo BITAL
  • Risk Analysis
  • Valuation before the Crisis
  • Questions and Discussions
  • Post Crisis Valuation
  • Epilogue
what happened next
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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