VENEZUELA, learns to diversify after turbulent political times LATEST REPORT April, 2002
Venezuela emerging from a difficult decade
Interview with
Mr. GUSTAVO MARTURET President of Banco Mercantil
For World Investment News Ltd, August 31st 2000
This year, you are celebrating your seventy-five year anniversary since you started operations in 1925 under the name of Banco Neerlando Venezolano, and you were considered last year as the best Venezuelan bank by "The Banker" and "Euromoney." Can you give our readers a historical background of Mercantil Servicios Financieros and briefly present your subsidiaries, which are Banco Mercantil, Merinvest, Commercebank, Seguros Mercantil, Holding Mercantil International and Maracima?
Let’s begin saying that we are a company in a small country, and everything that has to be said by us has to be seen in that context. Venezuela is a small country and the Venezuelan banks are smaller than compared to others in the world. We have developed recently a concept of, Mercantil Servicios Financieros which is a company registered in the Caracas Stock Exchange market and incorporated in 1997, who owns ninety nine point seven of Banco Mercantil. Banco Mercantil was established in 1925 in a very small city (Caracas was in those days exactly that) perhaps less than two hundred thousand people. Our shareholders were ninety-eight people who set up established the bank. Since then our shareholders, story, and activity has been growing. The Bank represents the largest activity or subsidiary of Mercantil Servicios Financieros, with 68% of total assets as of June 30, 2000. This is not our only subsidiary, Mercantil Servicios Financieros also owns Seguros Mercantil, which is a local insurance company. We also have a U.S. Bank in Florida, Commercebank, National Association, which represents 27% of total assets of Mercantil Servicios Financieros total assets. We own a very small bank in Switzerland named Banco Mercantil Schweiz AG and a certain number of small off shore institutions, one in Curacao and another in Cayman Islands. Our approach is that through Mercantil Servicios Financieros we try to provide our Venezuelan customers all the financial services that they need beyond banks in Venezuela who have commercial purposes. We not only offer our clients banking services, but provide them insurance, investment and other financial services.
All the subsidiaries mentioned are one hundred percent owned by us. In fact if anyone invests in Mercantil Servicios Financieros in the Caracas Stock Exchange they are investing in all these activities. In terms of dollars, Mercantil Servicios Financieros has 5.14 billion dollars in total assets as of June 30, 2000, which again is a fairly small amount when you compare it to other large institutions in the world. The differences of assets are mainly in our banking and investment activities abroad.
Banco Mercantil was in the past a commercial bank, today it is a full service bank. We try to provide other services that our clients need through this network; we have divided our clients in three big groups. The large corporations, the medium and small companies, and the individuals. Mercantil serves them through different types of products and services. The idea behind this costumer segmentation is to serve the clients in the best way we can and give them top quality service. For this reason we have invested heavily in technology for many years. In the mid eighties we developed an ATM network, which. Was not the first in Venezuela but the biggest. Today, we have close to seven hundred ATMs, and are connected with Conexus, a local network and Cirrus and Visa Plus International Networks. We have a Call Center 24 hours a day to serve our banking, insurance, brokerage and credit cards clients. Since the end of 1997 we have an Internet banking activity where one can see accounts balance, pay telephone and utility bills, check credit card balances and more, just through the use of the computer.
Among many international awards received in 1999, you were distinguished by "PC News and Report" as the "Best Internet banking" institution in Venezuela. How important is for you the development of Internet banking services?
In the long run I think it is very important. My personal opinion is that Internet is a possibility of transforming completely the banking and service industries. We are very committed in transforming our bank as soon as possible using these new technologies. We have put together a team of people and we incorporate a company where Mercantil has two partners. One is Mc Kinsey and the other is J.P Morgan and the idea is to develop a B2B and a B2C sites to serve our clients. We are presenting these internet developments to some independent regional banks to expand products and services rendered through those site. We are in contact with other banks in Latin America banks to jointly develop these services in other countries. I think that in that area of serving the clients and transforming the way banks do things, the Internet will be very helpful.
The impact in the insurance business is similar. We are providing on-line insurance products to our clients and looking forward to the possibility to establish a pension fund business unit, if the government decides to allow private sector participation in this activity the way it is currently done in Chile, Mexico and other Latin America countries.
Mercantil is also working in financing foreign trade mainly from Commercebank to different countries in Latin America. We established Banco Mercantil Suiza with the purpose of developing of trade finance from Europe to Venezuela and other Latin American countries. We have been financing trade activities for many years, mainly through Banco Mercantil and Commercebank .
You participate in the Venezuelan, Latin American and US capital markets which enables you to meet your clients’ financing and investments needs. How do you intend to increase your participation on the national and international markets?
If you see it from Mercantil Servicios Financieros´perspective, we have a level one (over the counter) sponsored ADR program. We have foreign shareholders that have invested mainly through the Caracas Stock Exchange. About sixteen percent of our shareholders are foreign institutional investors. To participate in a foreign market is very difficult for a Venezuelan company. If Venezuela Government concentrates in 2001 on the economic performance, and oil prices do not drop we may grow around five percent. That would really boost Caracas Stock Exchange and would increase market liquidity.
One of the main current issues today regarding your bank is the buy out of Interbank controlled by the Gill family. Can you tell us more about what motivated the merger with the Interbank and what are your financial expectations?
The reasons for merging Venezuelan banks are not too different from the reasons underlying mergers in banks in the world. Margins are under pressure, costs are under pressure, and globalization is growing. Nowadays it is more important to have larger amounts of assets managed by a reducer number of persons and supported by cutting-edge technology. Many banks are going through the process of mergers, and Venezuela is not different in this matter. We have been talking about mergers in the Venezuelan banking system for a lot of years now. In our case the merger will help us increase our assets, close to six point five billion US dollars. We also feel that it is a way to increase our client base and the capacity to serve better in the region. We are in the process of doing the merger . Even though we are competing with other banks, our reasons for the merger are different. One of themain reason for themerger is the possibility to increase our client base, to expand products and services and improve their quality. We like to be perceived as the best bank and not as the largest. When you merge it is difficult to escape from the analysis of wanting to be larger. I think that in Venezuela three or four banks of which we hope to be one of them, are going to be making acquisitions and mergers.
Large foreign Investors are used to tapping offshore banks since Venezuelan banks do not have enough assets. After your merger, do you think you will be able to catch a significant level of those large clients?
It all depends what you consider a large client. Speaking in terms of a global client, perhaps he would like to deal with a global bank. Not necessarily the best services for a large company are provided by a global bank. Small banks like ours can provide local services as good if not better than those of global banks.
You were talking about improving technology, and Internet services which should require large amounts of investment. In which sectors of your activity would you be interested in attracting partners?
We think that our right approach and strategy is to stay as an independent bank. We welcome foreign investors, but our strategy is to remain independent. We had a partner in the insurance because that is not par of our core business. Recently we bought back their stake because they are selling all their investments in Latin America. In areas of technology like Internet for instance we have partners such as McKinsey and JP Morgan and we are looking forward to others, eventually.
Our readers are constantly looking for new investment opportunities. Where would you recommend them to invest today in Venezuela?
In services in general. This is one of the areas in which we will grow more in the future. Telecommunications will, for example, expand further. The real estate area will grow in the future but not immediately and areas related to the oil industry as well.
We mentioned it in the beginning of this interview, you are currently celebrating 75 years of existence. Is it for you the opportunity to better communicate around your services?
We have used our anniversary to remember that we have to stress our strong commitment to our country, principals, and values. For a company to be around for this long it is necessary to have these values and principals to always preserve and develop. We take this opportunity to get this message across to our personnel and clients. We want to commemorate this date more than celebrate it. Here seventy-five years down the line I see us with the same principals and values and serving our client the best we can. You can change anything you want in a company; image, name, and people. The basis for a company is that the principals are clear and strong.
You are today the president of Mercantil Servicios Financieros, how do you feel about holding such a position as we are celebrating this 75th anniversary and entering the new millennium, what would be your greatest challenge over the coming months?
I think the challenge of any human being is to be responsible, to meet all obligations everyday, that is the biggest challenge. To fulfill ones responsibility, to do what one must do and do it always. If one is able to do this everyday, then I am sure that the challenges that seems harder become easier. We have a great and supportive Board and a wonderful group of shareholders. I also have had the fortune of working with a great staff. All these opportunities I have, such as working with good personnel and being able to offer different services to people, I enjoy with pleasure, because I like my work. The day I stop working with the same amount of pleasure that I always have, that same day I will stop working.
NOTE: World Investment News Ltd cannot be made responsible for the content of unedited transcriptions.
VENEZUELA
