New AFP Crecer owner plans customer service changes

- Friday, October 15, 2004

New AFP Crecer owner plans customer service changes

Salvadorian financial holding Inversiones Financieras Banco Agrícola, the soon to be new owner of pension fund manager AFP Crecer, is planning important changes to the way the company deals with its clients, an official at the holding's main asset, Banco Agrícola, told BNamericas.

"We are going to make some changes especially on the customer service side of the business as well as some changes in our financial offering to make it more attractive for customers to be in the AFP," the official said.

Spanish group BBVA said on Wednesday it would sell its 62% share of AFP Crecer and 51% stake in BBVA Seguros for US$42.9mn to investment vehicle Fondo Universal, a unit of Inversiones Financieras Bancosal.

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Bancosal, which owns El Salvador's third biggest bank Banco Salvadoreño, will cede a 62% stake in the two companies to Inversiones Financieras Banco Agrícola once regulators approve the BBVA-Bancosal transaction. Bancosal will retain a 38% minority stake in the former BBVA companies.

The new controllers of AFP Crecer have ample experience in the pension business and also count on the support of an advisory board of Chilean and Colombian pension experts. Agricola was the former owner of AFP Confia, which it sold to Citigroup International, who then sold the company to the country's second largest banking group Banco Cuscatlan in 2003.

"First we want to consolidate our service and the company's operations and then we will see where we can grow," the official said.

El Salvador's compulsory pension fund system, under which salaried workers contribute a portion of their salary to AFPs, is dominated by AFP Crecer and AFP Confía. As of June 30, 2004, the two companies had nearly 1.12 million clients and US$1.8bn in assets under management.

Once the BBVA deal is approved the country's top three banking groups will be well entrenched in the pension business. That leaves fourth place Banco de Comercio and the local banking unit of Canada's Scotiabank as the only major banks without an AFP.

"We did a study to see if there was room for a third AFP and came to the conclusion we could go it alone with a new AFP. But this opportunity [AFP Crecer] presented itself and we took advantage of it," the Agricola official said. "According to our analysis there was an opening for a [third] AFP."

Scotiabank, currently negotiating the merge Banco de Comercio with its Salvadorian bank, is absent from the compulsory pensions industry in Latin America. However, Mexican subsidiary Scotiabank Inverlat reportedly was in talks with pension fund managers in that country earlier this year.

"Legally it's possible to set up a new AFP, but in practice it would be difficult. It is a capital intensive business and the formal market has already been taken. With a third AFP you would see a re-division of the existing market," a source close to AFP Confia said.