UPDATE 2-HSBC boosts Mexico unit with $500 mln to increase lending

Thu Jan 31, 2013 1:14pm EST

MEXICO CITY Jan 31 (Reuters) - HSBC is giving its Mexican unit a $500 million capital injection to increase lending in Latin America's second-biggest economy, the bank said on Thursday.

The Mexican unit, whose London-based parent was slapped with a $1.9 billion fine in December for money laundering lapses, has lagged behind other foreign banks that dominate lending in Mexico, despite a $700 million injection from its parent in December 2009.

The capital raise, which will be completed by next Monday at the latest, is aimed at boosting consumer lending and expanding financing of production chains for import/export companies, something the bank has succeeded with over the past year, according to Jaime Pena, the CEO of the Mexican subsidiary.

Mexican manufactured exports rose to an all time high in December on strong U.S demand, helping the country to notch its first annual trade surplus in 15 years.

HSBC's expansion in Mexico comes as the company scales back its operations elsewhere. According to Pena, the bank has "divested" from 44 different countries in the last 2 years, but sees a bright future in Mexico.

"Mexico is a great destination for investment," said Pena, pointing to Mexico's exporting strength. It has "public finances that I think are enviable, (and) macroeconomic policy managed with great orthodoxy."

He added that HSBC has its second largest network of branches, and largest network of ATMs, in Mexico.

HSBC is Mexico's fifth largest bank with assets of 495.6 billion Mexican pesos ($38.91 billion). BBVA Bancomer and Citigroup's Banamex unit are Mexico's two biggest banks.

HSBC has a 7 percent share of bank lending in Mexico, with a loan portfolio of 195.8 billion pesos but has lost market share in the last year.

Lending has lagged in Mexico behind other Latin American countries, with outstanding commercial bank loans as a percent of GDP below 19 percent in 2011, according to the IMF.

On Wednesday, London-based HSBC announced it was hiring a former U.S. deputy attorney general to avoid a repeat of lapses in its anti-money-laundering controls that led to the fine.

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