MEXICO CITY -- Competition between Mexico's two biggest banks is heating up as they learn the rules of shareholder accountability and jostle with each other ahead of an eventual showdown with foreign banks.

Banco Nacional de Mexico, better known as Banamex, and its rival Bancomer have roughly 60% of the nation's deposits and loans between them. With $30.5 billion in assets at yearned 1991 Banamex was less than $1 billion ahead of Bancomer.

"They have to make it on their own now and they have shareholders to answer to," said one Mexican banker.

Dramatic Changes

Until last year they both had the same, single shareholder: the Mexican government. And there were no foreign-owned competitors to worry about. Foreign ownership of banks in any form was outlawed until July 1990.

Mexico's banks were nationalized in 1982 by then-President Jose Lopez Portillo. President Carlos Salinas de Gortari's current government finished privatizing the banks which number 18, last month.

Now the big two, which have developed a friendly rivalry in the close-knit banking community, are under pressure to generate profits to satisfy shareholders eager to recoup the high prices they paid.

Banamex sold for 2.62 times book value and Bancomer for 2.99 times book value.

"It will take a while to see who will come out on top," said Alexander Anderson, research director at Abaco, a brokerage firm.

Struggle for Lending Business

"The competition has always existed," said Javier Fernandez Carbajal, director of planning at Bancomer, adding the rivalry encompasses all banks. "We are all trying to improve our presence in the markets."

The principal battleground is the nascent market for loans to individuals and small and medium-size businesses, analysts say.

Constrained for years by triple-digit inflation and a slumping economy, most consumers and small enterprises were too busy trying to remain solvent to take on debt.

The current economic rebound has unleashed pent-up consumer demand and spawned new markets for the production of medium-size businesses.

It is an area in which Bancomer, long a retail-oriented bank, has the edge. As Mexico's lending grew 20% last year in real terms, corporate lending climbed 28% while lending to individuals soared 43%, according to National Banking Commission data.

Banamex leads in corporate lending, a market already under intense competition from foreign financial institutions.

Banamex also has ties to the premier brokerage firm, Acciones by Valores, known as Accival.

Retail a Strong Suit

Analysts say Bancomer's strong foothold in retail gives it the potential advantage, with 760 branches, compared with 717 for Banamex.

Bancomer's retail edge is already visible in the race to win individual accounts for Mexico's new retirement system. Bancomer has garnered 38% of the accounts for companies with more than 100 employees.

The Bancomer group also got a jump on its competitor with a $1.14 billion international public offering last March, the first by a Mexican financial institution. Banamex was to make an offering in June but delayed it after the stock market plunged.

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