JPMorgan Infuses $250M in Mexico

By: Zacks Equity Research

June 20, 2012

On Monday, JPMorgan Chase & Co. (JPM - Analyst Report) announced that it has infused $250 million capital in its Mexican subsidiaries with the aim of benefiting from one of the fastest growing economies. The additional capital infusion brings the total registered capital in JPMorgan’s Mexican division to about $653 million.

In 1994, Ministry of Finance and Public Credit (SHCP) authorized JPMorgan to set up a financial group (J.P. Morgan Grupo Financiero, S.A. de C.V.) in Mexico, which included a bank (Banco JPMorgan, S.A.) and a brokerage firm (JPMorgan Casa de Bolsa, S.A. de C.V.) as well. The established group offers wholesale banking services, investment banking, corporate banking and other financial services.

JPMorgan funded the financial group in Mexico with the objective of increasing lending capital for its clients. The additional capital infusion to the bank in Mexico awaits final regulatory approval. Once approved, JPMorgan’s lending limits in the country will be enhanced and clients will have additional credit opportunities.

Moreover, JPMorgan is expected to infuse additional capital in the brokerage firm in order to boost its equity market activities in Mexico.

The company believes that the additional capital funds and recruitment of more employees will provide the bank with ample opportunities over the long term. The bank has expanded its business in Mexico significantly over the years. It has hired 200 people based in Mexico for furnishing numerous financial services to a broad range of clients.

Recently, JPMorgan has also infused nearly 2.5 billion Yuan ($394.08 million) in its Chinese subsidiary – JPMorgan Chase Bank (China) Company. JPMorgan has also received permission from the China Banking Regulatory Commission (CBRC) to open a new branch in Suzhou.

The infusion of the additional money brings the total registered capital in JPMorgan’s Chinese division to about 6.8 billion Yuan ($1.1 billion). The additional capital will be utilized for expanding its footprints, launching new products and boosting corporate lending. Moreover, the permission to open a new branch in Suzhou will enable JPMorgan to meet the financial and banking needs of the institutional and corporate clients in that region.

Similar to JPMorgan’s planned investment in a Chinese trust firm, other international banks like Barclays PLC , Macquarie Capital, Royal Bank of Scotland and Bank of Montreal also have invested in a number of foreign trust companies.

Presently, Mexico has been attracting a large number of foreign companies that are willing to gain market share in one of the fastest growing economies.

Currently, JPMorgan retains a Zacks #4 Rank, which translates into a short-term Sell rating. However, considering the fundamentals, we maintain a long-term ‘Neutral’ recommendation on the stock.