I have received endless calls, emails and messages about my recent post, almost unexpectedly, so I feel obliged to keep my loyal readers up to date on the unfolding problems in Peru. I have therefore diligently prepared three new posts (I will assume that readers of these posts have read the original):
- An update on recent events (below)
- A brief description of some of the warning signs of a microfinance crisis
- A brief analysis of the financials of MiBanco up to Dec 2013 based on MixMarket data
First, Credicorp posted some disappointing results. Earnings are down 28.1% in 2013 due to “extraordinary expenses” in their investment bank and insurance areas. So, does this increase or decrease their chances of buying a defunct and large Peruvian bank such as MiBanco? There’s no comment so far.
But in a comic twist, following the rather unexpected sale by Grupo ACP of a 12% holding in BancoSol in Bolivia (they still hold a 6% stake after the sale), the CEO of BancoSol made a most extraordinary statement. I shall use Google Translate in order not to be accused of unfair translation:
“As part of its investment policy worldwide, and on the understanding that [Grupo ACP’s] mission to establish strong microfinance institutions that empower microentrepreneurs in several countries has been met in Bolivia, ACP decided to transfer part of their participation in a group three European banks through the advice of the prestigious Responsibility Investments AG of Switzerland.”
So, according to this interpretation, Grupo ACP decided to sell simply because it had already achieved such stellar performance in Bolivia that it would flog the shares to the Europeans. No mention of the fact that Grupo ACP is in technical default on its senior bond, presumably facing a rather dire cash crunch, and looking to sell whatever it could to avoid a full-blown default on the bond prompting Fitch to cut the rating to junk status. Are we to believe this was a pure coincidence of timing? And with their clear mission to “empower microentrepreneurs”, there was no mention either of the fact that MiBanco, ACP’s main asset, empowered nearly 100.000 fewer this year.
And what exactly is ACPs current “investment policy worldwide”? I suspect if could be “flog anything you can and use the funds to pay interest on that pesky bond that we should never has issued in the first place” – hardly a sophisticated strategy.
My question is simply, what gets flogged next? Banco Forjadores in Mexico? Apoyo Integral in El Salvador? Emprenda in Argentina?
But my questions don’t end there. How much did ACP get for the sale? I imagine the “prestigious” responsAbility made a tidy buck on that one. Someone in Switzerland will get a nice bonus this year. Such prices are rarely disclosed, and given the political and regulatory risk in Bolivia right now it is hardly a risk-free investment.
The million dollar question, obviously, is whether Credicorp (or anyone, for that matter) has agreed to buy MiBanco. If they decline the price will plummet. It’s one thing to offer a widget for sale at $10, it’s another thing to wonder around seeing if anyone will buy your widget in a hurry despite others having announced in the national press that they aren’t interested. The longer they wait the lower the price, and the greater the stress to ACP and speculation in the market. Maybe they could post it on eBay?
“Peruvian bank for immediate sale, any offer accepted, cash only, vendor assumes no responsibility for the quality of the portfolio or for the cost of a major restructuring involving substantial redundancy payments, buyer will have to share ownership with some pretty irate Dutch investors, the vilified microfinance fund Accion, and the IFC. See other items for sale by this vendor”.