Walmex sticks to breakeven target for bank

By Cyntia Barrera Diaz

MEXICO CITY, July 16 (Reuters) - Walmex, Mexico's leading retailer, is not altering its target of having its banking operation break even by 2011, despite changes in the way it lures new bank customers, a company source said on Wednesday.

Wal-Mart de Mexico launched its no-frills banking services -- which customers mainly use to get credit for buying domestic appliances -- last year, aimed at low-income earners, a segment long neglected by big financial institutions.

At the end of June, Walmex (WALMEXV.MX) had 38 banking branches near its supermarkets. In a bid to better promote its services and cut costs, it is now adding 400 small banking booths inside its stores, mostly its Walmex Supercenter and Bodega Aurrera outlets.

"We stand by what we had told the market," the Walmex source told Reuters when asked if the new approach would affect the 2011 breakeven target for the bank operation.

The source said Walmex, which originally planned to open as many as 80 banking branches this year, will not add any more branches.

Instead, Walmex bank representatives at in-store booths will gather information from potential clients and submit it to the bank for approval, speeding up the process and cutting costs.

In addition, Walmex is awaiting approval from financial authorities to collect bank deposits via its regular cashiers, following in the steps of rival Soriana (SORIANAB.MX), which offers a similar service.

"It is cheaper to install a booth and carry out the operations at the store cashiers, like Soriana does, than opening a bank branch," said analyst Marisol Huerta of Actinver. "What they are looking for with the change is to improve (bank) results."

Walmex's banking unit posted a second-quarter loss of 71 million pesos ($7 million).

Soriana, Mexico's No. 2 retailer and headquartered in the northern city of Monterrey, teamed up with bank Banamex last year to offer financial services and expects this venture to become profitable at a faster pace than Walmex.

The battle between the two retailers has heated up in recent weeks as they use aggressive campaigns to attract clients with discounts or three-for-two promotions as food prices continue to climb, boosting inflation.

Shares of Walmex, a unit of U.S. retail giant Wal-Mart Stores (WMT.N), were up 1.42 percent at 40.10 pesos, while Soriana shares rose 2.96 percent to 34.49 pesos. (Additional reporting by Gabriela Lopez; editing by John Wallace)