April 20, 2007 / 3:29 PM / 12 years ago

UPDATE 2-Mexican microlending bank surges in market debut

(Adds details, background and byline, updates share price)

By Noel Randewich

MEXICO CITY, April 20 (Reuters) - Shares of small Mexican bank Compartamos, which specializes in lending to mom-and-pop businesses, surged as much as 34 percent in their $407 million stock market debut on Friday.

Owners of Banco Compartamos COMPARTO.MX, which means “let’s share” in Spanish, sold about 30 percent of the bank, spokeswoman Luisa del Castillo told Reuters.

More than 80 percent of the offer was placed in New York, with the rest on Mexico’s stock exchange, according to a company release.

Mexican shares of Compartamos jumped as high as 53.53 pesos after the company priced the offer at 40 pesos per share. In afternoon trading the stock eased back slightly to 52 pesos.

Compartamos said it sold 111,572,532 shares, with an over allotment provision of 16,735,880 shares. It was unclear whether banks managing the offer exercised the over allotment, worth about $61 million.

Compartamos, with profits of around $57 million last year, has just over 600,000 clients in rural and semi-urban regions of Mexico.

“We have clients who work in food, clothing, shoes and crafts,” Castillo said. “They’re people with anything from a super-small business up to a corner store.”

Despite lending to customers with little credit history or collateral, Compartamos has kept past-due loans below 1 percent of its portfolio.

“The offer received a lot of demand from institutional and retail investors,” said one banker associated with the offer. “This is a one-of-a-kind story in the market today, which is why there is so much interest.”

Last year, Bangladeshi economics professor Muhammad Yunus received the Nobel Peace Prize for pioneering microlending as a way to create self-employment and escape poverty.

The World Bank’s International Finance Corporation, which backs private companies with an eye toward eliminating poverty in developing markets, is the third-largest shareholder in Compartamos.

Mexico’s government gave Compartamos a banking license last year, prior to which it had operated as a specialized lending firm.

Mexico’s mostly foreign big banks, led by Citigroup (C.N) and BBVA (BBVA.MC), focus on a small but growing middle class, although they are beginning to design consumer products for lower-income clients.

The big banks’ branches are absent from many rural areas in Mexico, where one in two people live on less than $5 a day. ($1 = 10.98 pesos) (Additional reporting by Monica Medel)

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