Mexico's stock market swoon is prompting U.S. bankers to reassess their business prospects in the burgeoning nation.

The 15% slump in equity prices this year has shadowed new offerings. That means less business for U.S. commercial and investment banks, which have taken the lead in bringing Mexican borrowers to the international capital markets for the past two years.

"A lot of banks are going to have to rethink their strategies about how they are going to compete and make money," said a U.S. banker who asked not to be named. "We're going to see some real problems with all the [equity] issues that have been lined up."

U.S. banks have earned tens of millions of dollars in fees and commissions in the last two years structuring and placing international debt and equity issue for Mexican borrowers.

Among the banking companies most active in arranging such transactions have been J.P. Morgan & Co., Bankers Trust New York Corp., Chase Manhattan Corp., and Citicorp.

Tarnish on the Revival

But the stock market's downturn has taken some of the luster off Mexico's dynamic revival. "LoLonger-term, people are optimistic," said Eduardo Cabrera, Mexican analyst at James Capel in New York, "but in the short run. Mexico is in for a bumpy ride."

Among companies seeking to raise capital, one of the biggest losers so far is Banco Nacional de Mexico, or Banamex, the country's biggest bank.

Banamex sought to raise up to $1.5 billion through an international equity offering that was to have been co-managed by Goldman, Sachs & Co. and Acciones y Valores, the Mexican bank's brokerage arm.

A Damper on New Issues

The offering was postponed indefinitely last week as a result of market turbulence.

Other Mexican corporations and banks, like Comermex, are said to be reconsidering planned equity issues.

Mexican stocks have nosedived in recent weeks on widespread profit taking by foreign and local investors and on concern that free-trade talks with the United States and Canada are faltering. Mexico's Bolsa price index closed at 1,603 Monday, down 15% from a high of 1,893 for the year.

Banks were among the heaviest losers in last month's drop.

Grupo Financiero Bancomer, for example, closed at 5,200 pesos a share, or $1.67, Monday, down 21% from a high of $2.12.

Banamex-Accival SA de CV, parent of Banamex, fell 19.2%, to 18,100 pesos, or $5.80, from a high of $7.18.

If the stock market doesn't stabilize. Mexican banks seeking to increase their capital won't have access to world markets, bankers and analysts said.

Mexican banks that are unable to meet international capital standards would have to rely on current shareholders to make up for any capital shortfall, they added.

The market turmoil could also mean that Mexican banks won't gain fresh capital to expand and help defray the high prices investors paid to acquire the 17 government-owned banks that have been privatized in the past 18 months.

Dollar-Peso Mismatch?

Analysts add that falling stock prices are not the only worry.

Mexican companies, including banks, have been borrowing heavily in dollars in the United States and on Euromarkets to lend and invest in Mexico.

Banks alone have borrowed an estimated $6 billion to $8 billion, of which the Big Three banks - Banco Nacional de Mexico, Bancomer, and Banca Serfin - account for about three-fourths.

But they and Mexican industrial corporations remain heavily dependent on earnings in Mexican pesos. Any sharp devaluation of the peso, coupled with an economic slowdown, could send profits at Mexican companies plunging.

Position Eroding

"If you follow the deterioration in the external accounts and growth of the current account deficit, there is significant potential for an exchange rate correction," said Manuel Lasaga, managing director at International Management Assistance Corp. in Miami.

Mexico's trade deficit reached $15.5 billion in 1992 and is now running at $1.2 billion to $1.5 billion a month.

Meanwhile, growth in Mexico's gross national product is slowing.

James Capel, a London-based investment bank, estimated that economic growth had fallen to a 3.6% rate in 1991, with a marked slowdown, to 2.8%, in the year's second half.

Fearing a Run on the Peso

Although the situation is still manageable and could be reversed if a free-trade agreement is signed. Mr. Lasaga and other analysts warned that it would be hard to control a run on the peso if sentiment turns against the Mexican currency.

A devaluation of the peso, he predicted, would slow economic growth and increase inflation.

"Both would be negatives for [Mexican] banks," Mr. Lasaga said. "To the extent they have borrowed funds in dollars, a devaluation could sharply reduce their profitability."

Other analysts were less pessimistic, remaining confident that the Mexican economy will soon resume steady, less overheated growth.

Effect Called Minimal

"Our impression is that it won't have a very significant impact," Javier Fernandez, director of planning at Bancomer, said of the stock market slide. "Growth in GNP might go from the 3.7% originally predicted to 3.4%, but it certainly won't go from 4% to 1%."

"The reality is that the region continues to offer some of the best growth prospects in the world," said Neil Allen, managing director for Latin American at Bankers Trust in New York. "The fundamentals continue to be much stronger than a lot of other places."

But bankers and analysts also warned that investors would have to do a lot more homework about the companies they are buying.

Mexican companies and banks and their U.S. financial advisers, they added, can no longer assume that any issue will fly just because Mexico is hot.

"No new issues for two to three months would be healthy for Mexico," said Geoffrey Denis, head of research at James Capel in New York. "It will cause people to be more sensible will lead the way for a more stable market."

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