Citigroup Inc. says revenue growth at its Mexico unit will slow this year because of government-ordered fee cuts meant to spur borrowing.
Grupo Financiero Banamex SA will report a revenue increase of about 11%, compared with 19% in 2004, the unit's chief, Manuel Medina-Mora, said in a March 3 interview in Acapulco.
"We're expanding the base of customers and … reducing the level of fees, the level of interest rates," said Mr. Medina-Mora, 54, who also runs Citi's Latin American unit. "That doesn't mean the bottom line will grow at the same rate," he said.
Central Bank Governor Guillermo Ortiz has encouraged Mexican banks to boost lending and made them reduce the fees that made up more than a quarter of their revenue last year. (For example, in September Banamex cut its fee for bouncing a check to $9 from $73.)
Mexican consumers generated $3.1 billion in fees and other payments last year.
Citigroup paid $12.7 billion for Banamex in 2001 to expand in Latin America's largest economy. In 2004 the Mexico City unit accounted for about 10% of Citi's $17 billion profit, and revenue of $4.5 billion represented 5.2% of Citi's total.
Lending by Mexican banks rose 25% last year, the biggest increase since the peso was devalued in December 1994. The economy grew 4.4%, its fastest pace President Vicente Fox took office in December 2000.
Fees for all Mexican banks fell for the first year in at least five, and income from services such as checking overdrafts and credit card annuities dropped to 29% of revenue from 31% in 2003, according to data compiled by the Association of Mexican Banks.
Competition kept banks from raising lending rates.
Addressing the bank group's annual meeting last week, Mr. Ortiz said there is more room to reduce fees and increase lending.
Last week he also scrapped fees that Banamex and BBVA Bancomer, a unit of Banco Bilbao Vizcaya Argentaria SA, charged smaller banks on electronic payment transfers, saying the move would help reduce customers' fees.
