Merger creates banking giant

Spanish are investing heavily in Mexico

Mexico's largest bank, Grupo Financiero Bancomer, is merging with the Spanish banking giant, Banco Bilbao Vizcaya Argentaria (BBVA), creating the largest private financial institution in Latin America.

The merger ends months of wrangling about who would take over Bancomer.

BBVA and another leading Mexican bank, Grupo Financiero Banamex-Accival, known as Banacci, had both been battling for the bank.

"Grupo Financiero BBVA Bancomer will be the largest Mexican financial institution and the leading private financial institution in Latin America in terms of deposits and client base," Bancomer said.

Bad loans

BBVA is making a $2.5bn bid for the bank, including a $1.4bn cash injection, which will allow Bancomer to clean up its balance sheet.

The Mexican bank suffered from a raft of bad loans in the wake of the peso's crash about six years ago.

Bancomer said the new bank would have assets of 387bn pesos, 30% of total deposits in Mexico and more than nine million customers.

BBVA's bid is significantly higher than its original offer for the bank of $1.2bn, which provoked a counter bid of $2.4bn from Banacci.

Nationalist card

Banacci sought to derail the BBVA offer by playing the nationalist card, but bowed out of the race.

"Banacci respects the right of the board (of Bancomer) to decline the invitation it made to GFB to merge with Banacci and thereby constitute the principal financial group in Latin America," Banacci said.

Bancomer has recommended BBVA's offer to its board and the deal is subject to shareholder approval.

But shareholders are expected to vote in favour of the deal.

Banco Bilbao Vizcaya Argentaria is itself the product of last year's merger between two of Spain's largest banks, Banco Bilbao Vizcaya and Argentaria, which created one of the biggest banks in Europe.